Osborne rolls his sleeves up

Just in case you didn’t see the front cover of the Guardian, let me tell you: it’s a big day for George Osborne.  This, after all, is the day when he finally launches the Office for Budget Responsibility’s audit of the public finances – zero hour for the age of austerity.  Accordingly, then, Osborne has given his first major newspaper interview since becoming Chancellor.  Here, from that, is a quartet of observations for you:

Office for Budget Responsibility.  The more I hear about it, the more I like this Office for Budget Responsibility.  Sure, it’s another quango of sorts.  But anyone who has lamented the government’s wildly optimistic growth forecasts, or attacked their misleading debt figures, can’t really be too disappointed by independent oversight of these numbers.  What’s becoming clearer is that the OBR is a cornerstone of Osborne’s plans for a more transparent Treasury.  As Osborne says in his interview, we’ll get “a proper set of national accounts which takes into account such things as PFI liabilities which are currently off balance sheet.”  Encouraging stuff.

Deficit reduction this year?  So, according to the LibCon coalition document, “modest cuts of £6 billion to non-front line services can be made within the financial year 2010-11”.  But the question is how much of this will be used to plug the deficit, and how much will be ploughed back into the public sector.  Osborne suggests that “the majority” will go towards the deficit – but doesn’t give any numbers.  Worth keeping an eye on, this, as a measurement of how committed the coalition is to reducing our national overspend this year.

A British Glass-Steagall.  Now that we don’t have an outright Tory government, Osborne won’t be able to implement his plans for reforming the banks as he envisioned them.  A shame, in my opinion, as these plans were more radical and impressive than most commentators were prepared to admit.  It’s clear from this interview, though, that Osborne is still minded towards a Glass-Steagall style separation of investment and commercial style banking.  As I’ve written before, the Tories had wired in a kind of de facto separation into their previous proposals.  But now it sounds as though they could even go further, or at least there’s the possibility of that: “I want to bring all the arguments together and have a proper airing of the arguments for different degrees of separation of retail banking and investment banking and I think the best way of doing that is allowing the Bank of England to make its case allowing the government to make its case, allowing people like Nigel Lawson to make his argument.”

VAT. Yep, there’s the obligatory non-denial over VAT.  Here’s what Osborne says: “As I said during the campaign, we have no plans to increase VAT. But as we approach the Budget I am going to not start speculating about individual taxes. I think that is a sensible approach for a new chancellor.”   I’d be very surprised if we don’t see a VAT hike in the next year or so.