Happiness Day? Well, at least the Chancellor knows Labour offers nothing better

Columnist

Thursday 21 March 2013

Yesterday was International Happiness Day – unless you were watching George Osborne's fourth Budget.

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The Chancellor – lest we imagine he takes us for idiots – began by disabusing us of the notion that he could make us happy. Instead, he promised to be "straight" and to "level" with us. What's straight and level depends on where you're standing.

If we can't be happy about a growth forecast of 0.6% (half the Office for Budget Responsibility's prediction only three months ago), perhaps we are comforted by the fact it's still higher than Germany and France. That's certainly an improvement on the -5% in Labour's last year in office. Those of us who remember 2010's forecast of 2.6% may not be smiling much, though. Surely, however, everyone is happy that we're borrowing less? But if I borrow £500 on my credit card this year, it may be less than the £1000 I borrowed last year, but it's still borrowing more. To put it in perspective, the departmental savings Mr Osborne congratulated the Government on (£11.5 billion) are less than one-quarter of what we paid in interest on debt last year. By his own figures, the Government is missing its debt target by two years: by the end of this Parliament it will be 6% of GDP, the highest of any developed nation. And it was as a percentage of GDP that the Chancellor chose to express deficit reduction – down, he claimed, one-third. Until now, it has been calculated in pounds, in which case the reduction is one-quarter. What that boils down to is an admission that public-sector net debt will double (to £1.6 trillion) by 2018 from the figure when Mr Osborne entered the Treasury. So, having no money to spend, Mr Osborne's Budget was, as was always likely, largely fiscally neutral. What is potentially its biggest measure affects monetary, not fiscal, policy – the change to the remit of the Monetary Policy Committee of the Bank of England. This will be impossible to assess until we see it in operation. But sceptics may wonder if the Chancellor is hoping that Mark Carney, the new Governor, will dissolve debt through inflation, an alarming prospect given that sterling has dropped 25% since the meltdown without – the traditional payoff – it having boosted export sales one jot. The money for infrastructure investment, preferred solution of the neo-Keynesian economists, is a piffling £3bn, which will do little economic good, and – since it doesn't start until 2015 – certainly do the Tories no electoral good. On house-building, the one area of investment which many analysts believe may help the economy, Mr Osborne's "help-to-buy" proposals – despite their echo of Mrs Thatcher's popular "right-to-buy" – look more like its opposite. The Government is getting into the speculative building market (but not by building council houses) – and what opponents will no doubt call the sub-prime end of it, at that. What is to stop these houses, built by nationalised subsidy, going to buy-to-let landlords, or being sold on at once? Childcare support, up to £1200 per child a year, is similarly ambivalent: it can as easily be seen, in the absence of any change to married tax allowances and after the withdrawal of child benefit, as an assault on stay-at-home parents. The expected freeze in the fuel-duty escalator is welcome, and may have, as Mr Osborne claims, saved a rise of 31p per litre since it was introduced. But petrol has risen 40p per litre in the past five years. It rose 4p just last month. There might have been a return to the fuel riots had it not figured in the Budget. The cut in beer duty, which has been strangling pubs, was also overdue. But since the total saving for someone adhering to the safe drinking guidelines is about the cost of a pint a year, it's not the most generous giveaway. There are, in Mr Osborne's credit ledger, a few unquestionably good moves. The quicker removal of those on £10,000 from income tax (now to be introduced next year) and the extra percentage point cut in corporation tax are both sensible policies, though neither was unexpected. The one big surprise is also the best policy: the tax break of up to £2000 in NI payments is a genuine boost for small businesses. Even so, the Office for Budget Responsibility figures suggest the soonest we could possibly return to the GDP per capita levels of 2008 is five years off. Mr Osborne has one thing to cheer him: as Ed Miliband's speech showed, Labour has no credible alternative to offer, either. It's hardly joy unconfined, though.

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Happiness Day? Well, at least the Chancellor knows Labour offers nothing better

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