14 June, 2010
The excellent Larry Elliott – Economics Editor of The Guardian – warns that the ‘Deficit Hawks’ need their talons clipped.
It is clear to him, as it is to me, that the current clamour for cuts at all costs is either economically naive, or politically wilful. Is “the real agenda to finish the demolition job on the welfare state that began in the 1980s”?
Mr Elliott asks why the economic literates in government aren’t piping up to stop the madness. Where is Vince Cable? Where is Chris Huhne?
Good questions. We are sleep-walking with Europe and the rest of G20 into another recession, but this time it will be entirely self-inflicted.
Today, the newly-created Office for Budget Responsibility (sounds Pythonesque) produced some really quite boring figures. See for instance the summary by the BBC’s Stephanie Flanders.
I even bothered to look at the report itself. Interestingly, it is based on the old Goverment’s policies, not the Coalition’s. That makes it, already, hideously out of date. I wonder how much it cost to produce a document based on a reality which already did not pertain even when it was commissioned?
Given the report’s built-in obsolence, if I were George Osborne, I’d be hoping for some really juicy ammunition to come out of it. But sadly for him, it is lacking in tidbits.
Growth predictions are down a tiny bit from Alastair Darling’s numbers. Eg, he predicted 3.5% for 2011, and based his maths on a conservative 3%. OBR is now forecasting 2.5% growth. But many other figures are now predicted to turn out better than predicted under Darling. The net effect of these revised predictions is pretty much nil over the five years: OBR predicts a rise in the structural deficit by 2015 of only 0.3% of GDP – less than £5bn.
Stephanie Flanders reports that Sir Alan Budd and the authors have conceded, on questioning, that:
“that 2015 figure means that the OBR does think that Labour’s policies would have eliminated a large part of the structural deficit by the end of the next Parliament. The OBR expects it to go from 8.8% of GDP in 2009-10 to 2.8% in 2014-15.”
So, basically, no news in these figures at all.
Let’s see how tonight’s news reports the figures, then. Let’s see how tomorrow’s papers headline them.
Call me cynical, but I’m guessing: doom and portent.
Mr Osborne, predictably, claims: “It’s damning evidence that the mess the previous government left behind is even bigger than we thought”.
But elsewhere, I’m already seeing:
“The OBR report strengthens the case for cuts.”
“Britain’s debt levels rising faster than expected.”
“UK has bigger fiscal hole to fill.”
Some of that is of course to be expected. What worries me is it’s everywhere. Even The Guardian, in which Mr Elliott complains about the deficit hawks going unopposed, is on the band-wagon. Mr Elliott’s on page 27. Here, meanwhile, is the front page:
So whatever the press says tonight and tomorrow, don’t be fooled. The markets weren’t.
Following the report’s release today, the pound rose against the dollar.