Pint-sized ideas that amount to a peculiar manifesto

Columnist

Thursday 21 March 2013

George Osborne has no idea.

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IAN Bell Comment

This is not intended to insult the Chancellor's intelligence, necessarily. It simply means he has talked himself into trouble and can't think of a way to escape without losing face.

How much is face worth, then, to a Chancellor? The going rate is the price of one General Election. Ed Miliband was right about that much in his Budget reply.

Mr Osborne claimed to have a four-year plan to salvage the economy. It was supposed to come good in time for the next election. As the Chancellor, the Office for Budget Responsibility (OBR), the ratings agencies and everyone else knows, that isn't going to happen.The economic numbers say Mr Osborne is in desperate need of an idea. The politics says that to change course would be an admission of failure. So we get a "fiscally neutral" budget that fails to address the facts.The fundamental fact is the OBR growth forecast has been cut again, halved in three months, to 0.6%. The secondary fact is Mr Osborne is chasing a receding horizon in his attempts to bear down on debt. He is two years behind schedule. Come the election, if you trust the OBR, debt will still be rising.The Chancellor's response is the one he has offered since 2010. Government spending will be cut again. Some of that will come from departmental "underspends", but the £10 billion in savings nominated last year has been increased to £11.5bn.This means another assault on social security, or what the Chancellor calls welfare. It means an extension of the 1% pay cap, a cut in real terms, for anyone whose wages he controls. It means his room for manoeuvre will shrink further.His sole boast is that the deficit is "going down". Debt, however, is still rising, despite Mr Osborne's sovereign remedies, while borrowing – though Tories deny it – is edging upwards. So the austerity project lurches onwards.Hitched to that ramshackle wagon, the Chancellor has made only token gestures towards alternatives. It seems he intends to allow Mark Carney, the Bank of England's new governor-elect, latitude with inflation and growth. He also means to spend £3bn a year on infrastructure. As investments go, it's pitiful.In the context of all this, hearing the man who lost Britain its AAA credit rating boast of "taking a penny off the pint" could only sound risible. The whisky industry was neither mentioned nor assisted, despite its importance to exports which, as Mr Osborne admitted, are struggling.The cancellation of the fuel duty increase planned for September is also likely to leave drivers feeling ambivalent. Hearing a man proclaim he is sparing you a little financial pain is scant comfort if earnings are stagnant or falling. The same could be said of the £10,000 tax threshold beloved of Liberal Democrats and due to appear in 2014. Its effect on most earnings will be minimal. As an aid to the low-paid whose benefits are frozen, it is close to insulting. Tax-free childcare, another initiative, is only a help if your wages are better than derisory.Mr Osborne had a couple of ideas of which, patently, he was proud. One, to be fair, should make a difference. The other is an interesting attempt to solve a problem that has dogged successive governments.What the Chancellor calls his "employment allowance", removing up to £2000 of an employer's National Insurance bill, can only be welcome news to small businesses, even if – yet again – it will not become available until next year.Equity loans of 20% for all buyers of newly built homes, plus mortgage guarantees to all homeowners, might help the housing market, meanwhile. If you guarantee the banks and own a piece of them, you might as well guarantee the borrowings of the people banks are failing to serve. On that one, time will tell.Mr Osborne grew merry, meanwhile, in promising another cut in corporation tax two years from now. He failed to explain why a reduction to 20% would have a transformative effect when previous cuts, from 28% to the present 21%, have only succeeded in leaving big firms with piles of cash they refuse to invest.Had he risked honesty, he would simply have said everything Britain is experiencing will continue for years to come. He is taking the opportunity to remodel the British state, but doing nothing important to revive the economy.If this was his idea of a "Budget for our aspiration nation" he has a strange idea of what matters. Shrinking the state while shrinking the economy, strangling growth while piling up debt: it doesn't sound like an election manifesto.

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Pint-sized ideas that amount to a peculiar manifesto

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