{"id":6698,"date":"2015-03-18T20:20:51","date_gmt":"2015-03-18T20:20:51","guid":{"rendered":"http:\/\/www.glass-cage.com\/dianas_blog\/?p=6698"},"modified":"2021-01-13T10:41:58","modified_gmt":"2021-01-13T10:41:58","slug":"budget-2015-comeback-country-claims-must-not-mask-osbornes-failings","status":"publish","type":"post","link":"https:\/\/glass-cage.com\/dianas_blog\/2015\/03\/18\/budget-2015-comeback-country-claims-must-not-mask-osbornes-failings\/","title":{"rendered":"Budget 2015: Britain’s fragile recovery is based on an act of political conjuring"},"content":{"rendered":"

Economic miracle. No I don’t think so somehow. \u00a0There might be some trouble brewing don’t you know.<\/strong><\/em><\/p>\n

\n

\"PoweredThis article titled “Budget 2015: Britain’s fragile recovery is based on an act of political conjuring” was written by Heather Stewart, for The Guardian on Wednesday 18th March 2015 20.11 UTC<\/a><\/p>\n

George Osborne styled Britain as the \u201ccomeback country\u201d in Wednesday\u2019s budget. Yet the carefully crafted narrative, in which he plays the sombre statesman stewarding the economy back to calmer waters, barely disguises the nakedly political nature of many of his decisions \u2014 and the serious risks that remain.<\/p>\n

First, Osborne has only been able to cut debt as a share of GDP this year \u2013 hitting a target he was expected to miss as recently as December \u2013 and promise to call a halt to austerity before the end of the next parliament, as a result of a two-stage act of political conjuring.<\/p>\n

Instead of the five-year austerity drive he pencilled in as recently as December, he has now set public spending on what the independent Office for Budget Responsibility (OBR) called a \u201crollercoaster\u201d.<\/p>\n

The Treasury will now swing the axe more sharply than previously planned in 2016-17 and 2017-18, before switching back to deliver what the OBR calls \u201cthe biggest increase in real spending for a decade in 2019-20\u201d. <\/p>\n

It\u2019s a boom-bust spending pattern for public services no Whitehall mandarin would deliberately plan \u2014 but it will help Osborne to ward off the accusation that he is on an ideological crusade to shrink the size of the state.<\/p>\n

Second, the chancellor is counting on the proceeds of a pair of banking privatisations. He has announced plans to sell off a mountain of mortgages the government has owned since the bank bailouts, and a fresh batch of Lloyds Bank shares.<\/p>\n

The handy \u00a320bn proceeds \u2013 which, conveniently, he plans to pocket by the end of 2015 \u2013 will make no difference to the size of the public debt in the long term, because the state is losing out on the mortgage repayments and dividend income it would otherwise have received. <\/p>\n

But critically, banking the income over the next 12 months allows the chancellor to fulfil his aim that debt would be falling as a share of GDP by 2015-16.<\/p>\n

When it comes to the health of the economy, Osborne singled out international factors \u2013 not least the standoff between the combative Greek finance minister, Yanis Varoufakis, and his eurozone partners \u2013 as the key threats facing the economy.<\/p>\n

Yet perhaps the largest question mark hanging over the future of Britain\u2019s economy lies at home, in our woefully weak productivity record.<\/p>\n

Rising productivity \u2013 the amount of output each worker produces \u2013 is the key to generating sustainable economic growth and higher living standards.<\/p>\n

But while the UK economy has been creating jobs at the rate of more than 100,000 a quarter, allowing Osborne to claim that \u201cBritain is working\u201d, the fact is these workers are producing far less \u2013 and so being paid much less generously \u2013 than economists would predict.<\/p>\n

In this latest set of forecasts, the OBR has scaled back its expectations for productivity growth; but it still expects a recovery to something like normal growth rates. And no one knows whether that will yet prove over-optimistic. As the OBR puts it: \u201cSince it is difficult to explain the abrupt fall and persistent weakness of productivity in recent years, it is also hard to judge when or if productivity growth will return to its historical average\u201d.<\/p>\n

The balance of growth \u2013 between saving and consumption, imports and exports, debt-fuelled property speculation and sustainable long-term investment \u2013 is also far from what the chancellor hoped for. The OBR says the current account deficit for 2014 \u2013 probably the best measure of whether Britain can \u201cpay its way in the world\u201d, as Osborne likes to say \u2013 is likely to be at its highest level since the 1830s.<\/p>\n

And two more inconvenient facts mar Osborne\u2019s claim to have put Britain back on the road to recovery with the \u201clong-term economic plan\u201d that even the most disinterested voter must by now be bored of hearing about.<\/p>\n

First, most of the modest upgrade to the Wednesday\u2019s OBR forecasts for Britain\u2019s long-term growth potential resulted not from the government\u2019s economic management; not even from falling oil prices, which should boost consumers\u2019 living standards and cut the cost of production for many businesses. Instead, it came from higher-than-expected inward migration, which boosts the size of the workforce.<\/p>\n

\u201cWe now assume that net migration flows will tend towards 165,000 in the long term,\u201d it says. That adds 0.6% to potential growth \u2013 the speed at which it can grow without stoking inflation \u2013 over the next five years.<\/p>\n

Second, the recovery only really got off the ground in 2012, when the chancellor made a deliberate decision to ease off on the pace of austerity. We may finally have reached the sunlit uplands of the \u201ccomeback country\u201d; but we might have got here sooner.<\/p>\n

guardian.co.uk © Guardian News & Media Limited 2010<\/p>\n

Published via the Guardian News Feed<\/a> plugin<\/a> for WordPress.<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

Chancellor attempted to paint his nakedly political plans as statesmanlike \u2013 but UK\u2019s woeful productivity mars his boasts to have navigated the road to recovery<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"advanced_seo_description":"","jetpack_seo_html_title":"","jetpack_seo_noindex":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":true,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[3],"tags":[180,59,179,26,80,81,55,181,45,312,53,46],"class_list":["post-6698","post","type-post","status-publish","format-standard","hentry","category-musings","tag-analysis","tag-article","tag-banking","tag-business","tag-economic-policy","tag-economic-recovery","tag-george-osborne","tag-heather-stewart","tag-politics","tag-special-supplement","tag-the-guardian","tag-uk-news"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p6NRDR-1K2","jetpack-related-posts":[{"id":14430,"url":"https:\/\/glass-cage.com\/dianas_blog\/2015\/07\/11\/there-are-limits-to-our-empathy-and-george-osborne-knows-it\/","url_meta":{"origin":6698,"position":0},"title":"There are limits to our empathy \u2013 and George Osborne knows it","author":"diana Stone","date":"July 11, 2015","format":false,"excerpt":"The chancellor\u2019s budget was not about caring for the poor but wooing those who like to think they care","rel":"","context":"In "Musings"","block_context":{"text":"Musings","link":"https:\/\/glass-cage.com\/dianas_blog\/category\/musings\/"},"img":{"alt_text":"Powered by Guardian.co.uk","src":"https:\/\/i0.wp.com\/image.guardian.co.uk\/sys-images\/Guardian\/Pix\/pictures\/2010\/03\/01\/poweredbyguardianBLACK.png?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":2121,"url":"https:\/\/glass-cage.com\/dianas_blog\/2013\/12\/08\/osborne-wants-to-take-us-back-to-1948-time-to-look-forward-instead\/","url_meta":{"origin":6698,"position":1},"title":"Osborne wants to take us back to 1948. 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