George Osborne had dismal figures today, and still managed to present them as a triumph. He even presented his failure on the deficit (below) as a success, and got away with it because Labour really doesn’t have an alternative plan. The Chancellor did have some genuine boasts: the job-creation miracle continues and corporation tax revenue is up in spite of (or, rather, because of) corporation tax cuts. And he has his very own Mansion Tax! So he reduced his political exposure from the left, his main weakness now is on the fiscal right. And who will attack him from the fiscal right?
Anyway, that’s the politics – the below is the economics.
1. The deficit comes down a tad, but is still way off original plan. And Osborne claims there’ll be surplus in 2018-19.
2. Osborne’s debt mountain. Britain’s debt pile will have grown by more than half a trillion pounds over this Parliament, and the OBR now forecasts that it will peak at £1,638bn in 2018. That will mean the government owes almost £25,000 for every person in the country.
3. Growth high now, but lower later. GDP growth is a strong 3pc this year, but is downgraded after the election.
4. The unbelievable cuts to come. George Osborne claims there’ll be a surplus by the end of the next parliament, and challenges Labour to match this claim. To build up his surplus, he’d have to cut the state spending/GDP ratio to the lowest level in 80 years. Radical, yes. But credible? I suspect that no matter who wins the election, we will not see cuts anything like those outlined in the below graph. Even the OBR points out that you’d need another £15 billion of cuts in that pre-election year, with no indication where the cash would come from. But importantly, look at the red line, the tax revenue – it’s going nowhere.
5. Pain delayed. And delayed. And delayed. Look at the percentage of the heavy lifting which Osborne said would be done after the election. When he started (top left) he’d do almost all of it in this parliament. The spirit was willing, but the flesh weak – now most of is to be done after the election. What a legacy.
6. The job-creation miracle continues: Osborne’s income tax cuts have helped record numbers into work. Far more than even the Treasury predicted in its last Budget
7. But employment is high because wages are low. And will only creep back to recovery in 2020. You have to go back to the 1870s to find a time when wages took so long to recover.
8. Working 9 to 5. The Chancellor said that 85 per cent of jobs being created are full-time – and as you can see below, the government has something boast about here; there are 1.4 million more full-time workers now than there were when the coalition came to power. Osborne also said that people employed full-time have seen their earnings grow by more than 4 per cent over the last year. He forgot to add that it’s only those who are employees, not the self-employed, who have seen this growth – and self-employed full-time workers make up a fifth of the jobs growth under this government. Have they had a pay rise?
9. The public sector bloodbath. George Osborne will have slashed more 1.5 million public sector jobs by the time his economic plan is finished, the OBR forecasts. The Chancellor has already cut 500,000 so that means there are more than a million job losses to come. The deficit’s stubborn refusal to go down means that Osborne has to hack away at the public workforce in order to balance the books.
10. Stamp duty reform – a.k.a. a new Mansion Tax The new regime will cut stamp duty for the 95pc of buyers whose homes cost under £925,000. But look at the right hand side of the graph and you’ll see George Osborne’s own Mansion Tax.
11. Black gold shortage North Sea oil revenue (the red line, below) is down 75pc over five years and is set to sink lower still thanks to oil forecasts now almost $20 a barrel lower. Scotland had a lucky escape with its “no” vote. These figure would terrify an independent state.
12. Still the slowest recovery in history when you factor in the downgrade in later growth in later years. As the OBR says, the pain will now last ten years – and we’re not even halfway through.