WHEN the venerable William Gladstone sat down after delivering his Budget speech in April 1853, he had been on his feet for four hours and 45 minutes.
Fortunately, George Osborne was more succinct yesterday, speaking for little more than an hour. Even then, the content was a thin gruel: Modest stuff already well trailed in the Conservative media, a raft of minor giveaways to keep the Tory faithful happy, and a bunch of stealth taxes we will be hearing more about as the innards of this cobbled-together Budget become clearer over the weekend.
In the days of Gladstone and Disraeli, back in the 19th century, budgets were serious affairs prepared well in advance. But George Osborne has given us five since December 2014 and it is beginning to show. This might explain why Osborne’s personal delivery yesterday was less assured than I’ve seen from him on previous occasions.
People who know him well tell me he is a very humorous man in private, and does a great Boris Johnson impersonation. But in the bear garden of the House of Commons he is often ill at ease, especially under pressure. True, the Tory backbenchers cheered and waved their order papers when the Chancellor sat down. But during the speech – especially when he made a strong pitch to stay in Europe – there was only a polite silence. Osborne is fighting for his political life. I’m not sure he succeeded yesterday.
Here’s his problem: For the past six months, storm clouds have been gathering over the global economy. China is shuddering to a halt. Result: Collapsing commodity prices leading to global deflation. In the West, a flimsy recovery was hidden by central banks printing money to prop up shares. To maintain this wheeze, central banks have introduced the time-bomb of “negative” interest rates – literally forcing commercial banks to pay to lend to the state. Result: Banks are losing money and financial markets are wobbling.
All this is affecting the UK. The hard economic numbers were there yesterday. Growth has been revised sharply by the Office for Budget Responsibility (OBR), to a below-average two per cent for this year, and basically flatlining til 2020. That means less tax revenue, of course, which is bad news for a Chancellor who has made austerity and balancing the books (by 2019-20) his main goal.
In a sinking world economy, any Chancellor worth his salt would have focused on re-booting economic growth by easing fiscal restraints and boosting capital investment. This is exactly what international agencies such as the IMF and the OECD have been recommending. So what did our George do yesterday? If you read the small print in the official Treasury Red Book, he is introducing stealth taxes across the board in a desperate, and ultimately vain, attempt to meet his target of running a surplus in 2019.
Run a surplus when the global economy is going into reverse? Run a surplus when the slowing British economy is likely going to yield lower tax returns? Run a surplus when the independent OBR is now predicting a serial rise in annual borrowing every year til 2019-20? Suddenly, George Osborne is a true magician – or a politician so desperate to show he can deliver his pet idea that any respect for reality has vanished.
Yesterday saw some classic sleights of hand from Osborne, as with any conjurer seeking to distract the audience’s attention. Chief among them was the announcement that England’s remaining local authority schools are going to be “nationalised” and turned into so-called academies run from Whitehall. So much for devolution. So much, indeed, for austerity as the Chancellor managed to find £1.5 billion for this blatant piece of Tory propaganda. Or is it that the Chancellor is desperate to buttress his crumbling support inside the Conservative Party?
HOW has the Chancellor managed this magic trick of a budget surplus in four years when growth is falling? Partly by planning new spending cuts (worth £3.5bn) without saying where they will fall.
Partly, he has ramped up receipts, I calculate an extra £70bn, which will squeeze the economy, assuming they arrive. Partly he is relying on there being a million more workers to swell the tax base, which seems unlikely if the economy is slowing.
There were goodies for Scotland. Negotiations will be opened on a City Region Deal Edinburgh and south-east Scotland. Yet the Treasury has been stalling on this for months. To “help” the North Sea oil industry, Petroleum Revenue Tax (PRT) is being zero-rated.
But with petroleum prices floored, PRT actually raises nothing, so that is hardly the “strategic direction” rightly demanded by the SNP’s Stewart Hosie, when he replied to the Chancellor’s speech. The new sugar tax sent the share price of Irn Bru-maker AG Barr downwards. But spending the proceeds on childhood obesity, while a welcome move, smacks of the gimmickry we associate with this Chancellor.
Osborne got away with yesterday’s Budget only because Labour’s response was so poor. In reply, Jeremy Corbyn’s weak performance made his own backbenchers almost comatose – by my count, about half were on their mobile or iPad when he was speaking. Certainly, Corbyn comes across far better on TV than in the Commons pit. But he is weak on economics and the Tory benches taunted him mercilessly.
Yesterday’s was a fantasy Budget that will not stand for long. If the UK votes to leave the EU in June, expect an emergency budget in July to pick up the pieces. Otherwise, the Chancellor’s next mini-budget is scheduled for December. But if the global economy is in deeper trouble by then, the OBR will have to revise its numbers again. Growth might well dip below the current estimate to nearer 1.5 per cent or even lower. Wage growth has started flatlining and I simply don’t believe the OBR’s prediction of more folk in work.
Balanced books by 2019-20? That’s as likely as Osborne succeeding David Cameron as Prime Minister.
Swinney: Budget will slash cash for essential services
Budget 2016: Help for the oil and gas industry – but not enough
The National View: With Osborne in line to be PM, a second indyref cannot come soon enough
Budget 2016: Sugar tax is hailed but Irn-Bru bosses left with bitter taste
Budget reaction: ‘Next generation will be the poorest for decades’
Budget 2016: Only one Scottish charity to benefit from 'tampon tax' fund
Budget 2016: V&A museum bosses welcome £5m extra funding
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