Osborne's new, softer cuts
Fraser Nelson 3:06pm
George Osborne has today done some massive juggling. It wasn't a Budget for jobs after
all, but a Budget to help people cope with the soaring cost of living. North Sea oil companies and banks were stung for various income, fuel and corporation tax cuts. The Chancellor spotted —
immediately — that cost of living was the No.1 issue and turned on a sixpence. His skills as a politician were again demonstrated. But let's not fool ourselves. Fiscally, today's is not a big
Budget. What movement there has been is to make the cuts programme even milder than it already was.
The "total cuts" figure is, oddly, not printed in the Budget. Perhaps because it's so embarrassingly small. After the Autumn Statement, it was 5 per cent over four years. Now it's back to 3.7 per cent over four years: that is to say, total cuts of just 0.9 per cent a year. The Chancellor's cuts are mild — milder than Denis Healey's now-forgotten cuts. Over the next five years, the spending total has risen: in 2014-15, we'll be spending £744 billion, an extra £11 billion. A relatively small figure, but you get the overall direction. Remember this next time Ed Balls talks about "deep and fast" cuts.
Next, Osborne has back-shifted a lot of the pain. Originally, total spending was going to be down 1.7 per cent this year. Now, it's just 0.6 per cent. This is in the margin of error so it can be said that there are, in effect, no cuts in total spending this year. Pain has been shifted to the end — so the tax burden for 2015-16 has been revised up by £335 million. But this would be the first year of the next government.
Giveaways to cope with inflation are an expensive business. Osborne could deal with inflation by dismantling the failed Monetary Policy Committee model. But if he is going to accept high inflation (he matter-of-factly announced that it won't come back to target for at least two years), then he's going to keep needing to do these handouts to cope with inflation's effects. And how will he fund them? Not by going any easier on deficit reduction: if his does, he'll be back to Alistair Darling's trajectory. So, the obvious thing to fund the next round of tax cuts by finding deeper savings in government. By being more ambitious. Given that this year's total cuts have now been reduced to 0.6 per cent this year, that's not hard.
Previous
yank
March 23rd, 2011 3:35pm Report this commentWell done, Spectator chavs. You've managed to make a story out of nothing, and to bleat it out across the pages and force Dave's excellent Libyan adventure down below the fold, where hopefully it will be forgotten (it won't, fyi).
Nothing beyond Blairism was happening a year ago, budget wise, and nothing beyond Blairism is happening today.
Many thanks from the Cameroons to you Spectator chavs, however. You're filling your positions well, as well as you types could, I guess.
It won't matter though... stagflation isn't listening to your apologias, and stagflation doesn't read leftist blogsites, like the Spectator.
Fatbloke on tour
March 23rd, 2011 3:40pm Report this commentTrevor
Any chance you could have another look at your numbers, they don't make sense.
" - so the tax burden for 2015/6 has been revised up by £335bill - "
Complete gibberish as is your cuts nonsense, the cuts in cash terms have become smaller as the inflation forecasts have got bigger.
We will be spending more in 2014/15 than was announced before because the inflation picture has got worse u8nder our under-cooked chancellor.
Sniffy wants a deficit of 1.5% in 2015/16.
That is madness.
Cutting for the sake of cutting is just political spite, a dog boiler to the last.
Olaf Rye
March 23rd, 2011 3:50pm Report this commentThe cuts are not nearly severe enough. You think that the left would dance and cheer, but they still whinge. Why are there still so many administrators, bureaucrats and so much red-tape ? I will be impressed when every second person in an office at every government office is made redundant.
Hugo Chav
March 23rd, 2011 4:06pm Report this commentNew Labour, sorry the Camservatives, are such a wash out. There has been no bold restructuring of the UK economy. Without topline growth the economy will flatline and man in the middle class will mutate into becomnig working class.
You could sniff this all in 2007 and the stench is getting stronger.
British politics is rancid and the political elite are pygmies.
We are an Undeveloping Nation with no one awake at the wheel.
Edward
March 23rd, 2011 4:09pm Report this commentDidn't Canada manage cuts of about 20% in the nineties? So why can't we?
Tarka the Rotter
March 23rd, 2011 4:20pm Report this commentwe ran an empire once with only twelve government ministries...if we need cuts, let's start around the cabinet table.
Fatbloke on tour
March 23rd, 2011 8:32pm Report this commentEddie @ 4.09
Where to start on the Canada experience:
Well you need to start with a global recovery and be best placed to make the most of it.
Then you need tour neighbour to be 10 times your size and have a human being in charge who is working up a head of steam with their own economy.
Then you need to make the stuff they want, step forward the "LX" and have a couple of competitive advantages - universal state funded / organised healthcare and a non bonus wage structure.
Add in a low C$ and you have a booming manufacturing sector and to finish it all off, central government sends a hospital pass to the provinces regarding budgets and funding.
What have we got?
A low £ and a dog boiler running the show.
Not quite the same, no matter how the right and the media try to spin it.
TGF UKIP
March 23rd, 2011 9:46pm Report this commentThey're floundering, Fraser, and I think even you are beginning to recognise that.
Two things which will certainly emerge from today are HSBC and Standard Chartered being confirmed in their plans to quit London and further rises in electricity prices as a result of further "green" messing about.
For an objective view of today's Budget, courtesy of Guido, here's the IEA take:
http://www.iea.org.uk/in-the-media/press-release/budget-doesn%E2%80%99t-do-enough-for-growth
Questioner
March 24th, 2011 8:58am Report this commentThe argument that the cuts have become smaller is a poor one at best.
Yes, the forecast for total spending is now higher in future years - but why is that? Not because of more spending being handed to departments. It is the effect of higher inflation on our debt interest payments and benefits that are linked to RPI & CPI.
From this logic you seem to be saying that money spent on debt interest is a political win, whereas in fact the real terms cuts for departments just got bigger. I'm actually in favour of the cuts, but confused messages like this are not providing a particularly good argument.
Extranea
March 24th, 2011 9:36am Report this commentAnother damp squib from George Osborne. When will the reality live up to the rhetoric? http://bit.ly/hPGKu7
As for the petrol price cut it is meaningless in the scheme of things. The real problem will not go away http://bit.ly/edJ5hm
Jonathan Woolf
March 24th, 2011 10:16am Report this commentDid we actually have a change of government last year? We've ended up with Blair's foreign policy (macho posturing, a new war every month, fostering democracy by cruise missile), Brown's defence policy (gut gut and gut again), Mandelson's EU policy (thanks for that job-destroying regulation please may we have another) and Brown / Balls' economic policy (spend like a drunken sailor and pay for it with debt and stealth taxes on the private sector). Even worse, this lot are even less competent than the Brown regime - they can't even manage spin doctoring coherently.
What was the point in voting Conservative last May? I for one won't be doing it again whilst Cameron and Osborne are in charge.
God help us.
Mr. Green
March 24th, 2011 12:30pm Report this commentThe recommendations from all who were asked was that IR35 should be totally restructured or, better still, scrapped.
What did Osborne give us?
A helpdesk!
God help us all.
Tim
April 5th, 2011 10:58pm Report this commentIn 2007 the deficit was 43 billion(ish). We had Surestart centres and libraries and public toilets, and yet the deficit was manageable.
In 2010 the deficit was over 150 billion. Not because of increased public spending or lower taxes. As I understand it this blog ( http://bit.ly/SYZxu ) says the big difference was an increase in unemployment an companies going under or shrinking - less people paying tax, more unemployment benefit, etc.
So surely, by trying to solely rely on cuts to solve the problem we're looking in the wrong place. In fact inflation and rising unemployment is making matters worse. Moral issues aside, depending on cuts is like drilling more holes in the boat to let the rising water out.
And if the current cuts only result in a 0.6% drop in spending, what would we have to cut? 150 back to 43 is a 71% drop! We'd have to close all the schools, and hospitals, and police stations, except that would wreck the country and send unemployment through the roof and still not solve the problem.
Your figures are right, but your conclusions wrong. The issue is not that the cuts are too small, it's that cuts cannot solve the problem because they make it worse. We need to deal with inflation (which admittedly gets a mention) and we need to create jobs. Fast. Cuts are doing the opposite.
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