Osborne said he will stick to what was, in my view, the root error of the recession: the 2 percent CPI target. Inflation was fine in the boom years – it was asset price inflation that pointed to the debt bubble. No one noticed, because everyone was fixated on CPI. So the Conservatives have, essentially, incorporated Labour’s monetary policy. Fair enough, if that’s what they want to do, but it’s a bit of a push to call this new. Strikingly little was said about the proposed Office for Budget Responsibility, which is supposed to be instructing the government about the speed with which it must reduce the deficit. Instead, Osborne spoke about the Bank of England as an arbiter. Could the idea of the CBO be going out of fashion? I do hope so: parliament, not a quango, should keep a check on government.
Osborne wants to be judged on whether Britain keeps its AAA rating – a noble aim, but hardly radical. It goes without saying that if Britain were downgraded after Osborne’s first budget, it would be a damning indictment. The idea of a green investment bank does represent “change” in that the Labour government did not believe that the state should seek to incubate industries in the way the Tories are proposing to do (there are plans for a Green Stock Exchange, a Green ‘silicon valley’ etc). All told, there is very little between the Tories and Labour on the economy from what they have said so far. Osborne may well have a radical plan up his sleeve, but we didn’t hear it today.