Dispatches from the Green Budget
Peter Hoskin 11:44am
It's back to the British Museum for public finances anoraks. After George Osborne's speech here yesterday, the IFS are this morning presenting their Green Budget (that's green in colour, rather than green in outlook). It's the mid-session coffee break, so I thought I'd fill CoffeeHousers in on what's been said so far.
The bottom line came more or less immediately, with the IFS director Robert Chote's introduction. His point was that the next government will have to introduce "more ambitious" fiscal tigthening, going forward to 2015, than that set out in Darling's PBR. But he added that there shouldn't really be more spending cuts and tax rises this year. The way things have gone this week, that message may well suit both main parties - although I imagine that Labour, in particular, will make great play with it.
Elsewhere, Michael Dicks from Barclays Wealth suggested that GDP will be much slower to recover than the Treasury thinks - with potential GDP growth at 1.75 percent, perhaps even lower, until 2015. That's opposed to Darling's 2.75 percent forecast.
The IFS's Carl Emmerson had these points to add, among others:
- The Treasury's current plan is to get the deficit down with 1/3rd tax rises and 2/3rds spending cuts.
-Going off the government's plans, the period of greatest fiscal tightening is between 2010-11 and 2012-12.
- Extrapolating government plans forward, we wouldn't get debt down to under 40 percent of GDP until the early 2030s.
- The IFS are working on the assumption that when the Tories say they would get borrowing down "quicker," that means £15 billion less borrowing by 2015-16. Extrapolating forward, debt would still remain over 40 percent until the early 2030s.
And then Gemma Tetlow - that IFS researcher who has a knack for hunting down Brown's hidden spending cuts - set out why they think borrowing will come in £10.4 billion lower this year than the goverment expects. 'Tis all to do with higher-than-expected tax receipts and lower-than-expected public spending. Things took a gloomier turn, though, when she incorporated Barclay's more pessimistic forecasts for the economy. Under their "central" forecast, national debt would be pushing 90 percent of GDP in 2015, rather than the 77 percent the government foresees. Not good.
Anyway, it's time to find some caffeine and get back into the conference hall. I'll report any developments later.
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denis cooper
February 3rd, 2010 12:11pm Report this commentAt this rate the government could still be running a substantial budget deficit, and so it would still be adding more to the total debt, when the NEXT recession hits.
Which will be long before the 2030's, won't it?
denis cooper
February 3rd, 2010 12:59pm Report this commentAnd if the next recession is the more usual kind of recession, an inflationary recession, then it won't be possible to simply print money to fund the ballooning budget deficit - which is what this government has been doing since last March - and nor will it be possible to borrow from private investors, and so there'll be no alternative to the sudden, savage and destructive spending cuts which have so far been avoided this time round.
Far better to plan to make those essential spending cuts gradually, to first balance the budget and then run a surplus and pay down debt, while there's time to do that and allow the economy to adjust before the next recession.
Storing them up until the next crisis would just make the eventual, inevitable, pain far far worse, and really could finish us off.
But neither Labour nor the Tories seem to be signed up to the basic principle that the British government should live within its means, and not run a budget deficit year after year as a matter of course.
Austin Barry
February 3rd, 2010 1:26pm Report this commentThere seems to be a tacit agreement between Labour and the Tories not to discuss the massive spending cuts which are required.
To avoid alarming the electorate they are, like timid urologists, implying that a simple fiscal circumcision will suffice, when in fact they are honing their scalpals for a radical, post-election, penectomy.
I look forward to the inevitable screams and howls of pain and, perhaps, some kind of game-changing catharsis.
Barbara
February 3rd, 2010 7:42pm Report this commentBrown should have began cuts as soon has the crisis loomed, he didn't and this is the consequence. Yet, Cameron too,insists he will honour 'aid spending' while we borrow to furnish it. An example of madness is India where we have given £1045 million, yet they spend on sending missiles up into space, do they do it on our money? If they can afford this why do the require aid from us. Then there are the quangos they could all have been disolved saving money again which would have meant less borrowing, small amount I realise, but at least we would have borrowed less. We should stop all money leaving these shores till we have a grip on our own finances, yet none seem to believe this but carry on with the madness of borrow and spend, while the taxpayer is expected to pay the final bill and the people take the cuts. Its not fair or sensible and somehow we have to make them see and stop. Anyone who calls at 10 Downing St should be told there's no more money, we're bankrupt.
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