David Blackburn

The debate opens as Darling is vindicated and condemned

The debate opens as Darling is vindicated and condemned
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As Fraser observed at the weekend, Alistair Darling has a point: it is not as bad as was feared. The new Office for Budget Responsibility agrees, reducing estimated public borrowing to £155bn 2010/11. Still, it’s hardly a picnic is it? And I wonder what response Darling will get if he presses Cameron and Osborne for an apology. His growth forecasts have been downgraded to 2.6 percent and the structural deficit is greater than he admitted to – Paul Mason reckons it’s about £5bn more than was forecast.

Osborne’s hands are tied by these figures; his calculations will be based on them. There is, of course, the possibility that the OBR's predictions are no more accurate than the Treasury’s soothsayings. For example, the British Chambers of Commerce argue that these figures remain on the optimistic side.

The fiscal debate is far from closed, even among those who are convinced that spending cuts must start now. For instance, inflation will be a contentious talking point. The OBR calculate that inflation will stabilise over the next two years. Some will disagree, arguing that the long term effects of Quantitative Easing (printing £200bn) are yet to be felt. That debate will have a direct effect on the chancellor's immediate tax plans – is raising VAT worth the risk, or would it be safer to raise Capital Gains Tax? The answers to those economic questions are obscured by political sub clauses, especially given Ed Balls’ position on VAT and the divisive influence of CGT on the stability of the coalition. When all is considered, George Osborne faces a tougher task than Alistair Darling did.