Economy

Tuesday

Peter Hoskin

The briefest of stints

Well, that was quick: after only three months in the role, Alan Budd is to step down as the head of the Office for Budget Responsibility.  A shame, too.  In a quiet sort of way, he had become one of the defining figures in these early days of coalition government – helping to establish the OBR as one of the most significant actors on the political landscape.  It is certainly, now, a more effective body than I previously thought it would be. Although Budd’s contract was for three months, there was some idle Westminster speculation that he’d stick around – so the rumour mill is puffing away at his departure

Wednesday

Peter Hoskin

About those job losses…

Much ado about the Guardian’s scoop this evening: a leaked Treasury document which forecasts that up to 1.3 million jobs could be lost as a result of the spending cuts in the Budget.  Or, to put it in the words of the document itself: “100-120,000 public sector jobs and 120-140,000 private sector jobs assumed to be lost per annum for five years through cuts.” You can expect Labour to get stuck into these numbers, and the fact that they were previously hidden from public view, with no uncertain relish.  Ed Balls has already described them as “chilling”.  But it’s worth making a couple of points, by way of context: i)

Friday

David Blackburn

Obama wants ‘global concert’ to delay cuts

G20 summits are usually turgid affairs, but this one has some (limited) potential. Relations between the White House and Britain and the White House and Europe have been frosty of late. Afghanistan, BP, the Falklands, Merkel and Sarkozy’s irritation at Obama’s personal and political aloofness, all of these have been contentious. Diplomatic tension has now developed an economic arm. The broadly centre right governments of Britain, France and Germany are committed to cutting public spending now. Each has introduced an austerity programme, and Cameron has made retrenchment is his international cause. Obama still stands for stimulus. The President said: ‘This weekend in Toronto, I hope we can build on this

Thursday

Fraser Nelson

The true meaning of Osborne’s Budget

To understand the budget properly, read James Forsyth’s cover story in The Spectator today. Sure, it was about reducing the deficit – but within it lie several political strategies which explain how George Osborne hopes to win a majority Conservative government. James says that those around Cameron will not entertain this notion – they “have been persuading themselves that coalition government is the best possible result”. But Osborne, he says, finds it deeply unsatisfactory and has a twin mission: fix the economy, and win outright next time. “He has been observing recently that Gordon Brown spent 13 years successfully creating Labour voters — mainly through state dependency — and that

Wednesday

Fraser Nelson

The road to recovery | 23 June 2010

This is a slow-burning budget. Not because Osborne has concealed, like Gordon Brown did, but because the reverse is true. The budget is, as Osborne says, a third of the size but with three times the amount of information. It has layers: some policies and language are there just to assuage the LibDems. Some are pure Tory. James has a brilliant cover piece in tomorrow’s magazine which spells out the political, rather than economic, forces at work in this budget. Osborne, that great player of three-dimensional chess, sees in this budget plans to restore a Tory majority government. The Red Book itself is, for wonks like myself, a joy to

Tuesday

Ed Holmes

A credible start

Today’s Emergency Budget announced the most ambitious fiscal consolidation programme in decades.  It sets out a framework returning the government broadly to a state of fiscal solvency by 2014.  To do this, George Osborne announced a deficit reduction programme amounting to just over £100 billion in real terms – entirely in line with our recommendations.  The ratio of spending cuts to tax rises – 74:26 is largely in line with the international best practice model (which we also endorsed) of 80:20.   Instead of government living well beyond its means for the next four years, we estimate that the Chancellor’s plans will reduce the structural deficit – in other words,

Matthew Sinclair

Why must VAT rise? Because not enough will be cut

There is plenty of very good news in the Budget.  A two year public sector pay freeze, the abolition of the Child Trust Fund and cuts in welfare spending are all longstanding TPA recommendations that will be absolutely key to getting the public finances under control.  As a result of all the measures proposed, annual spending will be £31.9 billion lower than planned by 2014-15.   The Government are also scrapping more organisations.  The Emergency Budget report says (page 31) that “Regional Development Agencies will be abolished through the Public Bodies Bill.”  We called for their abolition as far back as August 2008 and the Spectator manifesto included a demand

Peter Hoskin

What Harriet Harman won’t tell you

By her usual standards, Harriet Harman was quite effective in her response to George Osborne’s Budget earlier.  She was clear, direct and had a few gags at Vince Cable’s expense.  And she also benefitted from what, on the surface, was a strong central attack: the Office for Budget Responsibility, she said, has downgraded its jobs forecasts on the back of the Budget.  And so, she followed, this is a Budget which destroys jobs. But there were a few things that Harman wasn’t letting on.  First, as Jim Pickard points out at the FT, the OBR forecasts haven’t shifted by all that much from their previous incarnation.  And, second, they are

Matthew Sinclair

George Osborne must put spending cuts ahead of tax rises

In 2009, Britain borrowed more, as a share of its national income, than any country that isn’t being bailed out by the IMF and the Eurozone (Greece) or already making drastic spending cuts (Ireland).  That huge deficit is the critical challenge to our economic stability that George Osborne needs to tackle with the Budget today.  We have got away with high borrowing so far on the understanding that cuts are coming now the election is out of the way.   If you think tax hikes are the answer, then you’re asking the wrong question.  Our present fiscal crisis is built on a decade of bumper rises in spending, not tax

Patrick Nolan

Back into the black

George Osborne has an historic opportunity to begin to turn the UK’s public finances back into the black. As Reform noted in an alternative budget released last week, while this will require making the toughest spending choices for a generation, history will smile on him if he does this in the right way. What the right way is will largely reflect three key things. First, George Osborne’s Budget needs to be ambitious in its timeframe for reducing the deficit. Setting out to, say, simply “eliminate the bulk of the structural deficit in the term of this Parliament” will not be enough. Delay will make fiscal consolidation harder as interest payments

Peter Hoskin

Osborne makes the “progressive” case

During the Brown years it was “stability,” but it looks as though the watchword for Chancellor Osborne’s first Budget will be “progressive”.  This is the word that’s being bandied about behind-the-scenes, and the coalition seems confident that it has the policies to match the rhetoric.  As the Guardian reports today, it’s likely that the personal income tax allowance will be raised by £1,000 or so, to help shield the least well-off from tax rises elsewhere.  And the paper quotes a Tory aide saying that the richest will pay more, “both in absolute terms and as a percentage of their income.” Whether he drops the p-word or not, the arguments behind

Sunday

Fraser Nelson

Osborne’s massive opportunity

I’m quite optimistic about George Osborne’s budget – in the same sense that one might have been optimistic when Churchill took over from Chamberlain. Not because the situation is good, or because you think the road ahead will be easy or enjoyable, but because the road no longer leads to disaster. Not that Osborne is a Churchill – even though he will have his own fair share of blood, sweat toil and tears for us on Tuesday. I’m pretty confident he’ll head in the right direction, and at the right speed. I discuss this in my News of the World column today, but will say a little more here: 1.

Saturday

Peter Hoskin

The Budget: compromise and non-compromise

It’s hard to overestimate the significance of Tuesday’s Budget. George Osborne’s statement won’t just determine the course of our economy for the next few years, but also the political life of this government. Spending cuts and tax rises may not inevitably “fracture the coalition,” as Peter Oborne puts it in the Mail today. But they certainly have the potential to. Happily for the coalition, the current political mood is so geared towards fiscal restraint that there will be little immediate opposition to Osborne’s general plans.  That will come once the effects of spending cuts are felt in individual constituencies  – months, even years, down the line. But there are a

Thursday

James Forsyth

The Big Society reincarnated

The Big Society is a great idea. But its problem has always been that it lacks definition; voters and even some Tory MPs aren’t quite sure what it means. But an idea being floated today gives you a sense of its practical and political potential. It is being suggested that the community right to buy, the idea that the community should have first refusal on any asset being sold off, should be applied to the port of Dover. The last government wanted to privatise the port but the new MP for Dover, a Tory called Charlie Elphicke has proposed that a community trust be allowed to buy the port and

David Blackburn

The euro crisis is an opportunity for Cameron

Gerard Baker has written the cover piece for this week’s magazine and it’s a must read. In it, he explains why ‘closer fiscal union’, as Rompuy terms it, is not to Germany’s advantage: ‘Any attempted fiscal union might well yield to Germany the biggest single vote in how much to raise in taxes and how to spend it. But it could still be outvoted by an alliance of smaller countries. Such a set-up would become an institutionalised mechanism by which German taxes will be siphoned off permanently to weaker European states. The nightmare for Germans is that an unholy alliance of Spanish, Greeks, Italians and Portuguese will be able to

David Blackburn

The coalition is edging the public spending debate

Danny Alexander acquitted himself effectively this morning. The restructuring of government spending has gone beyond bland clichés about ‘efficiencies’; with care, the government is dismantling Labour’s unfunded spending projects. £8.5bn in unfunded projects signed-off since 1 January 2010 are on a stay of execution until the autumn; £1bn of unfunded projects signed-off before 1 January 2010 are also on their way to the block. £2bn will be saved almost immediately with the cancellation of the 2 year jobseekers’ guarantee, the young person’s guarantee, CLG regional leader board, the local authority business growth incentive and the county sports partnerships. Controversially, the government has also cancelled the Sheffield Forgemasters’ fund and the

Peter Hoskin

Cameron’s European balancing act

So David Cameron strides onto the European stage today, with his first EU summit since becoming Prime Minister. And early signs are that it’s going to be a peculiar day for him. As Ben Brogan writes in the Telegraph, Europe seems to be liking the (liberal-democratised) Tories more than they thought they would. Sarkozy is, apparently, “smitten” with our PM, while Angela Merkel “has come to admire his directness”. So after pitching himself against the Lisbon Treaty, and broadly selling himself as a eurosceptic over the past few years, Cameron now faces the prospect of cuddles over the coffee and croissants in Brussels. Like I say: peculiar. I suspect Cameron

David Blackburn

A good war

As Allister Heath notes in City AM this morning, Mervyn King has had a good war. Well, not so much a good war as a profitable peace. King contributed to the domestic crisis by sustaining very low interest rates whilst ignoring asset prices. Brown may have forced the Governor’s hand, but King was groggily supine until a sovereign debt crisis threatened. George Osborne is dismantling Gordon Brown’s regulatory imperium. King is the major beneficiary as the FSA is subsumed by the Bank of England. How will exercise that power? Obviously, time will tell; but monetary tightening will moderate excess (and spruce up banks’ balance sheets) in the short-term. Heath reports:

Peter Hoskin

Osborne gets upfront about our debt burden

A couple of weeks on holiday, and there’s plenty to catch up on.  First, though, George Osborne’s speech to Mansion House yesterday evening.  In terms of substance, it was fairly radical stuff.  And it’s encouraging that so many of the Tories’ solid plans for reforming the financial regulatory system have survived the coalition process.  But, really, it was one simple, little sentence which jumped out at me.  This: “Debt [is] set to still rise even at the end of this five year Parliament.” “So what?” you may be thinking, “we knew that already.”  Ah, yes, but we’ve rarely heard a politician be quite so upfront about our debt position before

Monday

David Blackburn

The debate opens as Darling is vindicated and condemned

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