The first part is dire: acting as if the government’s borrowing is a choice that has got us into trouble, rather than a necessary reaction to the private sector retrenchment.

He has compared the borrowing (4% cost) to a credit card (17% cost); would you want a finance director with that bad a sense of proportion?

He has again highlighted debt interest being higher than the education bill.  Which was the same as under Thatcher – were her priorities also ‘crazy? He talks about interest rates going up and up for you and me, even though rates throughout this borrowing ‘binge’ are as low as they have ever been.

Then he talks about how they make tax rises inevitable.  But paying the deficit down alsoa involves tax rises, in part, even though Osborne is now claiming that the tax rises are somehow being done as an alternative to cutting wasteful inefficiencies.

‘First we are going to take action on debt to get the economy moving’.  If this is really how he sees the causality, he is utterly deluded about what is failing to get the economy moving, which – unlike in the early 80s – is not government oppression and high rates and taxes, but insufficient demand.  Even ‘wasteful spending’ contribute demand.

And in claiming to protect the NHS, and a list of other things (winter fuel, tax credits for the middle income) he will have to cut everything else by 20%

He then says he will boost enterprise and get job creation going.  But Darling’s Budget had a lot of measures to that end, despite Osborne claiming that the Budget did ‘nothing’ for growth.

His call to vote for them indicates that there is a choice between debt waste and taxes or the Conservatives.  But debt and taxes will have to be there under the Conservatives as well.  An honest account would have said “Trust me, it will be tough under us as well” rather than “it’s all about waste cutting”.  The only thing he admitted to needing cut was benefits for, you know, those benefits cheats.

If he is the next Chancellor, he will have to do a lot better than this.    This dismays me, because there are plenty of reasonable Conservatives out there – I met one on Monday night at a business event, a thoughtful bright guy – but they seem determined not to show this.

Now Baroness Warsi is ranting on QT about the deficit.  It always drives me mad …


14 thoughts on “Liveblogging Osborne’s Budget Reaction

  1. I think such analysis is nearly always a fruitless task. To try and infer what a politician actually thinks from such a broadcast is nigh on impossible.
    Trouble is, what proportion of the population understands that he’s talking rubbish? A small one, I’d imagine.
    And Baroness Warsi never fails to be entirely unimpressive.

      1. But on QT with Griffin I think I remember her being *very* quiet when homosexuality came up (she doesn’t have a good record on LGBT rights).

  2. Trouble is, what proportion of the population understands that he’s talking rubbish? A small one, I’d imagine.

    Andrew, you took the words right outta my keyboard…

    As a piece of policy-making, Osborne’s response was economically illiterate and in places outright dangerous. As a polemic, as an appeal to populist sentiment and as a cynical piece of electioneering, his insistence on perpetuating the myth that we face imminent debt-fuelled Armageddon is likely to win support amongst voters in key marginals that are convinced that government debt caused all our woes. Convinced admittedly by the Tory press and Boy George himself, but deluded and convinced nonetheless.

    At a recent Compass meeting @ Parliament, I heard ‘a leading commentator’ (Chatham House and all that…) say the public doesn’t yet understand quite how economically suicidal Osborne’s plans are – partly because for those that have escaped joblessness this recession hasn’t been as painful as it could have been – and that they won’t until they’ve lived through two years or so of cuts and further-reduced demand.

    It’s the old chestnut about not knowing what you’ve got till it’s gone – try slashing 20% of spending across the board – excluding the daftly ringfenced NHS etc – and then see how ordinary folk feel…

    1. And also we don’t know how pragmatic they are under the bluster, as Andrew points out.

      My feeling is that if the Tories DID do this, expecting 1984 and getting 1980, their lasting unpopularity (sans Michael Foot and the Falklands) might consign them to permanent exile – given that even in these current circs they are struggling to get 39%. They will work this out.

  3. I note John Redwood is now commenting on the increases in public expenditure during the first Thatcher parilament, which seems a slightly odd defence.

    I had a quick look for the data but can’t see it, but you seem to have thie stuff at your fingertips. What % of the increased expenditure went into additional social security spending? Figure 2.1 (b) on page of this IFS report seems to suggest that the increase in public expenditure as % of national income was mostly made up of spending on social benefits.

  4. The Tories are completely insane when it comes to the deficit. You really do have to wonder if it is mendacity or idiocy or both. We’ll just have to have higher taxes in order to pay ourselves back the money we borrowed from ourselves, or something. We’ll definitely end up poorer. It’s not like there’s a limitless supply of this stuff, you know. Oh, wait a sec…

  5. It is never obvious whether Osborne actually believes what he is saying or it is just politics and he believes his target audience views government finances like a household. For a prospective Chancellor he has a very poor image in the City because quite frankly a lot of people think he is an idiot. The old cash value of interest payments is trotted out with monotonous regularity. Why not use percentage of GDP or percentage of central government expenditure? No scare value in that I suspect. Why not say to the target audience I would like your private pension or annuity provider to have less money? It really is the same thing as internal UK debt interest payments are just a transfer payment to the insurance companies and pension funds.

    1. In many ways, Paul C’s point here echoing Richard’s is the most important and radical of all; all we get is a shifting balance between private and public assets and debts, in the absence of a massive international imbalance. Which means we can always afford to resolve either private or public indebtedness with a political solution, if we are brave enough. But why exactly is 75% of GDP in public debts, owned by the private sector and paying just 4-5% interest, a problem – when the private sector needs such instruments? That is a question Conservatives bury under the term ‘burdening our children with debts’.

      It is just as much ‘providing our pensioners with assets’

      1. In fact we can go further: the deficit is the net financial assets supplied by the government to the non-government sector in any given accounting period. The national debt is just the cumulative stock of the these net financial asset flows: it is public wealth. None of the press coverage ever seems to recognise this dual asset/liability relationship. None of the press coverage ever seems to talk about reducing the deficit in terms of reducing the income of the private sector, or in terms of squeezing liquidity from the private sector, or in terms of destroying the financial assets of the private sector, or in terms of frustrating the saving preferences of the private sector. The cash in my wallet, that’s a govt liability too–won’t someone think of the children and destroy it!

        I have another thought that I haven’t figured out yet. Perhaps y’all can help: If the govt runs a surplus, it is drains more monetary base as taxes than it injects as spending. As a consequence, the system is short high powered money. Only the govt can create it, so no amount of shifting around in the banking sector can relieve the pressure. The BoE will see the shortage of base money and re-inject missing sterling via repo OMO or lose control of its policy rate. Treasury takes with one hand and the BoE gives it back with the other. Is that accurate? At the end of all this, what has actually happened to the balance sheets of either sector?

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