Money Supply

Just as the UK government prepares to give the Bank of England more power, the central bank’s reputation with the public has slipped to its lowest level since independence.

Once a revered institution, as the chart shows, barely more people express satisfaction with the Bank’s ability to set interest rates to control inflation than those who are dissatisfied.

When he established the Office for Budget Responsibility, George Osborne had never envisaged his creation would give him such a grim day less than 18 months later. But the OBR has just told the chancellor that without further action his deficit reduction ambitions were seriously off track.

The latest forecasts with lower growth and higher borrowing implied Britain would miss Mr Osborne’s March Budget ambition of eliminating the current structural deficit by 2014-15 by miles. The original OBR forecasts showed he was set to meet his goals not one, not two, but only three years later in 2017-18, close to the election after next.

With such bad news, the government has had to announce not a “plan B” of policy stimulus, but an “augmented plan A” with £15bn additional spending cuts a year by 2016-17 – deeper cuts in the final two years than the annual austerity being undertaken now. And that is all just to allow him to scrape home on his fiscal mandate. Austerity is no longer a four-year pain, but a six-year trial.

Ahead of the Autumn Statement, the Treasury has released some details of its plan for growth, in what appears to be a cynical bid to muddy the waters. The truth is that estimates of Britain’s growth potential are being revised down across the board.

Are the announcements mostly sensible? They’re OK.

Are they large? No.

Will they change the narrative of the Autumn Statement? Only if Britain allows itself to be hoodwinked and reporters are as pliable as ministers hope.