Welfare Cuts Credibility

The Osbourne budget and the subsequent resignation of IDS t only threaten the governments claim that we are all in it together, much more seriously they raise questions about their economic competence. In November much was made of the discovery of a spare £27bn forecast over the 5 years of the parliament. In truth this is less than 1% of the expenditure over that period and it is a brave person in any business that thinks their figures are correct to +/- 1% over one year much less 5.

If Mr Osbourne had said at the time this was nothing but rounding and not something to be taken account of in the calculations he could legitimately have taken the same line now when the same calculations mean that instead of a £27bn benefit we have a £29bn deficit.

Critically, all this means that the Chancellor now has a £13bn hole in 2019/20 fiscal target of budget surplus. He has however more than made up the £13bn hole. But how has he done it? According to Paul Johnson, “More than half
of it is purely temporary – shifting tax revenues into that year and shifting
capital spending out. The target would not be forecast to be met without
both this shuffling of money between years and a wholly unspecified
spending cut of £3.5 billion on top of the specific cuts announced in
November.” In other words the figures have been made to fit the policy.

Nothing illustrates the approach of the Chancellor more than his repeated claim that he would never make the figures fit the policy as he delivers a budget which requires the figures to fit the policy. To be fair the fiddling did not look to the short term political advantage for the Tory Party it was more about long term career advantage of Mr Osbourne.

The charge the budget process is driven more by political considerations than National interest has carried little weight when it came from the Labour Party. When it comes from within the cabinet it is a different issue. There is a crack here which has the potential to undermine the key claim of the Conservatives, that they are better at managing the economy. Labour should seize the opportunity.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.