budget

I like it when one chart demolishes two myths.

The graph below from Citi’s Michael Saunders shows how the coalition government has consistently delayed its fiscal tightening.

This suggests how the chancellor has been less dogged in pursuit of “plan A” than often believed. If you were being kind you could say it was a sign of pragmatism. But it also indicates how, contrary to the Budget rhetoric about responsibility, George Osborne is funding some tax cuts with temporary revenue-raisers and unspecified spending cuts. Ironically, it is the sort of financial short-termism depicted above that worries the morte thoughtful critics of the chancellor’s pensions changes. 

On Thursday, the Institute for Fiscal Studies delivered its verdict on the Budget. If you prefer prose, I recommend director Paul Johnson’s lucid explanation. But for pithiness, you can’t beat this slide from Gemma Tetlow’s presentation:

For all the chancellor’s talk of investing for the long-term, the evidence from the IFS suggests that he is doing the opposite: funding permanent tax cuts through temporary schemes and to-be-determined spending cuts. 

When the new pound coin was compared with the threpenny bit, a currency that I think was last used in 1368, we should have known this would be a Budget for those in their dotage. The Conservative party’s core vote has eroded, in part because of the rise of the United Kingdom Independence party, which for all its huffing about the EU is more concerned with the familiar: immigration and living standards. The chart below, via IpsosMori/the Guardian shows the extent of this erosion. It depicts voting intention by age. Last year, for the first time, baby boomers became no more likely to say they would vote Conservative as the so-called Generation X (1966-1979).

 

Consider this a graphic complement to your bluffer’s guide.

1. This is Britain’s fiscal future. Taken from the IFS, it shows how we are not yet half way towards the full fiscal consolidation planned by this government. This amounts to about one-tenth of national income. The colours within each bar show how consolidation is biased towards spending cuts and against tax rises, and how benefit cuts will take up a larger share in the next parliament.

 

Wednesday is the UK’s Budget day. For those who enjoyed exams when they were younger, this is a glorious occasion; the chancellor announces lots of new information, including some things have that haven’t been leaked, and he prompts a scramble to understand what it means. Normal people and the rest of the world find the scene baffling. But there is a good chance you will be called upon to say something intelligent about this unintelligible event – and that this will happen before any typically-brained human being will have been able to analyse the figures.

Here are seven things that you can say in any conversation about the Budget. This bluffer’s guide has the advantage that you don’t have to watch the event.

1. “Any announcement worth less than £10bn is not worth discussing.” No-one wants to seem without perspective or worse, vision. And vision means the big picture and the big picture means big numbers 

These charts show public sector net borrowing excluding the accounting treatments of Royal Mail and asset purchase transfers. Revised growth forecasts mean that the deficit is projected to fall sooner than previously expected – and there might be a surplus in 2019.

These changes provided the backdrop George Osborne’s Autumn Statement, a confident defence of his economic strategy in the past, present and – crucially – future. The latter included arguably the most clear-eyed articulation of supply-side reforms in recent memory. But the frame was the improvements in the economy relative to March. In this sense, seven months have made a huge difference.