Treasury

The OBR warns of a fiscal storm

The Office for Budget Responsibility’s 126-page Fiscal Sustainability Report really oughtn’t make for electrifying reading. But it does. What Robert Chote and his gang of number-crunchers have done is to gaze into our fiscal abyss, and summon up forecasts so that the abyss can gaze back into us. I mean, look at the graph above. On the OBR’s account, our country’s debt burden could well rise from around 70 per cent of GDP now to over 100 per cent in 50 years time. It is a perturbing trajectory, to say the least. But, before we go any further, we should slap all kinds of health warnings across this. Long-term forecasting

Personality and politics

One of the things about the press that politicians frequently complain about is that papers concentrate more on personalities than policies. But reading the latest extracts from Alastair Campbell’s diaries you see just how much personality matters. Indeed, according to Campbell, Tony Blair excluded Gordon Brown from a discussion about what to do after 9/11 not because of any difference about how to respond but because he had become fed up with how difficult Brown was to deal with on a personal level. Now, there are nowhere near the personal tensions at the top of this government that there were in the last one. But because politicians are humans and

James Forsyth

To see whether the coalition will last, watch how the Lib Dems respond to Dilnot

The approach that the Liberal Democrats take to social care over the next few weeks and months will be the best guide we have to how they now view the future of the coalition. If, in the coming all party talks, they effectively ally with Labour and try to score points off the Tories by suggesting that their coalition partners are ‘too mean’ to fund a solution to the problem then it will be apparent that they have moved fully into distancing mode and are preparing to position themselves as the party who restrained the Tories. This would imply a Lib Dem exit from the coalition sometime well before the

The trouble with today’s social care report

Uncertainty reigns. Or at least when it comes to today’s Dilnot Report into social care it does. We largely know what measures will be contained within its pages: a higher threshhold for council-funded care, but a cap (of around £35,000) on how much individuals ought to be liable for. What’s less clear is how the government will respond. Far from welcoming the report wholeheartedly – as has been the recent form with these things – there are signs that the government is set to resist some of its recommendations. Andrew Lansley spoke cagily of it yesterday, hinting that the cap was proving particularly difficult in Coalition Land. George Osborne is

Treasury notes reveal Osborne’s position on euro bailouts

There has been much talk about what George Osborne told Alistair Darling about the EU bailout mechanism during those days in May between the election and the coalition being formed. But notes of a conversation between Osborne and Darling released today show that Osborne did urge Darling not to commit to anything that would have a lasting effect on the public finances. Osborne also suggested that the UK government might abstain due to the fact that the country was between governments. To which Darling’s reply was that the Cabinet Secretary’s advice was that the government was the government until a new one actually took office. It remains to be seen

A nation of shareholders?

The great sleeper issue in British politics at the moment is what to do with the state owned bank shares. The money that could be generated by a sale of these bank shares is massive. The state’s stake in RBS is bigger than all the privatizations of the 1980s combined. Nick Clegg’s proposal (£) that everyone in the country be given shares in the banks is one option. But I suspect that would overly depress the value of the shares and would reduce the amount of money that the government would have in its pre-election war-chest. A more likely option is still a scheme where these shares are sold at

Subsidy Junkies!

Meanwhile in happier news for Alex Salmond and his merry throng, the latest GERS figures are out and you can expect to see the Natiionalists trumpet them to all who care to listen: Government and Expenditure Revenue Scotland 2009-10 figures show that, including a geographical share of UK North Sea oil and gas revenues, Scotland contributed 9.4% of UK public sector revenue and received 9.3% of total UK public sector expenditure, including a per capita share of UK debt interest payments. Including a geographical share of North Sea revenues, Scotland’s estimated current budget balance in 2009-10 was a deficit of £9bn, or 6.8% of GDP – stronger than the UK-wide

It’s not just about public sector pensions

The bustle around public sector pensions has obscured an equally significant, pensions-related story today: the Sunday Telegraph’s claim that George Osborne is considering sucking £7 billion from the pensions of higher earners. The way it would be achieved, reports Patrick Hennessey, would be to terminate the tax relief on pension contributions made by those in the 40 and 50 per cent income tax brackets. He adds that the Exchequer could spend the resulting funds on deficit reduction, or on notching up the basic state pension. At the moment, it sounds as though this is just one of those on-the-table type deals: an idea being passed around the Treasury, but not

Your three-point guide to today’s Ed Balls files

Less soap opera, and more policy grit, in today’s batch of Ed Balls files. There is, for instance, a lot on Gordon Brown’s proposed Bill of Rights (here, here, here and here), which is as ambrosia for future political historians, but is fairly turgid reading even for today’s political anoraks. Likewise the charts and doodlings related to the structure of Brown’s Downing Street. Yet some things do stand out. Here are a few of them: i) What the Treasury says, Brown didn’t do. You’ve got to admire the Treasury’s attempt to inject some realism into the fiscal calculus back in 2006. “Flat real” spending — i.e. public spending that rises

Valuing the natural world

Today, the government launched its Natural Environment White Paper. This document is a vision for how we value and use nature, now and in the future. The public was heavily involved in the White Paper’s creation. Thousands of suggestions came from individuals and small local naturalist groups, right up to large national NGOs and bodies like the National Trust. This shows that concern for nature is alive and well in Britain. The paper was launched by Caroline Spelman; but, crucially, it received input from Greg Clark from Communities and Local Government and Norman Baker from Transport. The Treasury have also been close partners. The proposals seek to reconnect people with

The IMF delivers its verdict

While Dominque Strauss-Kahn was in a New York court room, pleading not guilty to charges of sexual assault, his former IMF colleagues were delivering their verdict on the UK economy at the Treasury. The IMF are very polite guests and their report has provided some timely support for the coalition’s fiscal approach by declaring that there is currently no need for a Plan B. The Osborne operation has been quick to point out that even in various alternative scenarios the IMF set out in their report, they don’t call for more spending or smaller cuts. But there are things which the IMF says that won’t be music to Osborne’s ears.

Inflation bites back

  Good job we didn’t unravel the bunting after last month’s inflation figures. Because today we discover that CPI inflation rose again in April, by 0.5 percentage points, to 4.5 per cent — its highest level since October 2008. That drop in March does look like a blip after all. Even with RPI inflation continuing to fall (by 0.1 percentage points), we seem to have returned to a grim, upwards trajectory. Most forecasters predict that inflation will keep on rising for the rest of this year, outstripping wage growth along the way. The squeeze on living standards continues: We have dwelt on the political problems this creates for Osborne before,

The battle over the 4th carbon budget

At the weekend, it appeared that Chris Huhne had won his battle with Vince Cable and George Osborne over whether or not the government should sign up to the 4th carbon budget. This budget covers 2023 to 2027 and is all part of a plan to cut carbon emissions by 80 percent by 2050 compared to the level in 1990; they have currently been reduced by 26.5 percent from the 1990 level. But it now appears that the greens in government might have been premature in declaring victory. First, the next set of cuts in UK carbon emissions is dependent on the European Union agreeing to embark on an equally

Economy grows by 0.5 per cent in the first quarter of 2011

So, we’re not back in recession, and growth of 0.5 per cent in the first quarter of this year is in line with what many forecasters were predicting, but… It is hardly indomitable stuff. As Duncan Weldon explained in a useful post yesterday – in which he rightly picked me up on a loosely worded post of my own (since, cheekily, edited) – 0.5 per cent merely compensates for the shrinkage experienced thanks to the snow last year. Across the last two quarters, economic growth has effectively plateaued. It’s as we were, Q3 2010. The politics of the situation is fissile, even if we are stuck in the murky area

Osborne is on track to rebalance the economy

It may look diminutive in between Easter and the Royal Wedding, but tomorrow is still a big day in the political calendar. It is, after all, the day when we hear the official growth estimate for the first quarter of this year. A negative number, and we shall have experienced two consecutive quarters of shrinkage — which is to say, the country will be back in recession. A positive number, and we shall have avoided that unhappy fate. So what are the forecasters saying? The consensus among bodies such as the NIESR and the CBI is around 0.5 percent, which – as Duncan Weldon explains in a very useful post

The Treasury Select Committee gets prescriptive

Andrew Tyrie promised that the Treasury Select Committee would be an assertive, insistent body under his stewardship — and he hasn’t disappointed so far. The committee’s recent evidence sessions have been fiery affairs, particularly by the usual standards of these things. And today they have released the result: an extensive and prescriptive report into last month’s Budget. Several of the report’s observations are worth noting down — not least that advance briefing of the Budget is “corrosive of good government,” and that “almost all the evidence received [about the government’s Enterprise Zones] is unsure about the extent to which they will contribute to UK growth.” But more significant is the

Fraser Nelson

Osborne needs to make his case for growth

The Guardian have an odd story today. “Business chiefs who backed cuts now doubt UK growth,” runs the headline — suggesting that these sinners are now being confronted with the error of their own ideology. Who are the business chiefs? We have Archie Norman, the retired head of Asda, now part-time chairman of ITV. He “said the government’s growth targets were too optimistic”. Set aside the fact that the government doesn’t make growth targets now, and has subcontracted that the Office for Budget Responsibility. Where is the connection between growth downgrades and cuts? In the imagination of The Guardian, I suspect. Next Andy Bond, another former head of Asda, is

How might the MoD get round its spending settlement?

The Ministry of Defence is Whitehall’s last monolith. Charged with the nation’s defence, it is powerful enough to challenge the Treasury. As Pete notes, there are signs that it’s trying to defer (if not avoid) the cuts laid out the punishing strategic defence and security review. It has many ways of doing this. Obviously it can use political pressure because troops are deployed in Afghanistan and Libya. But there’s also a neat accounting step that allows the MoD can transfer costs directly to the Treasury. You may recall that the Budget contained a £700m increase for ‘single use military expenditure’ (SUME) in 2011-2012. SUME does not appear as capital spending

More demands on George Osborne

Is the defence budget the most chaotic in all Whitehall? George Osborne said as much last October — and he’s still dealing with its hellish intricacies now. The main problem, as so often in military matters, is one of overcommitment. Thanks to various accounting ruses on Labour’s part, large parts of the MoD’s costs were hidden in the long grass of the future. It was buy now, pay later — with Brown doing the buying bit, and the coalition doing the paying. The number that William Hague put on it last year was £38 billion. The MoD was spending £38 billion more, over this decade, than had been budgeted. Even

Winners and losers | 6 April 2011

The birds chirruping in the sunlight clearly didn’t get Ed Balls’s memo. Otherwise they’d know that today is “Black Wednesday,” the day when the coalition’s tax and benefit policies swoop in to leave the average household some £200 a year worse off. This is the message that the shadow chancellor is broadcasting this morning, be it on Radio 4 or in a post for Labour Uncut. His claim is that the coalition is — by going “too far, too fast” on the deficit — merely squeezing the “squeezed middle” even more. Only that’s not quite the full picture. The Treasury, for one, is pointing out that today’s measures will actually