£12bn deficit increase puts Osborne’s plans in doubt
Number 10 may have been reluctant to comment this morning on revelations by the FT’s Chris Giles about a £12bn ‘black hole’ in the public finances but Lib Dems, cornered at their conference in Birmingham, were more open.
Senior Lib Dem MPs quizzed on Monday suggested they were not entirely surprised by the 25 per cent increase in the structural deficit, but not surprisingly, are still not in any mood to back further cuts to bring it under control. Read more
Darling’s book has blunted Ed Miliband’s best line of attack
On the day after George Osborne admitted that he had recently lowered his short-term growth expectations, and with a row currently waging over the government’s wish to scrap the popular 50p top rate of income tax, Ed Miliband might have been expected to use the first PMQs after the summer to attack David Cameron on the economy.
But instead, we found ourselves in two rather old arguments, about police numbers and NHS waiting lists. While both are undoubtedly important subjects, somehow the debate felt a bit off-topic.
The reason for Miliband avoiding the big issue of the day became apparent later in the session, when the prime minister was asked by a Labour backbencher about the 50p rate and replied:
The person responsible for Labour’s economic policy at the last election said that they had no credibility whatsoever.
He was referring to Alistair Darling, Labour’s former chancellor, whose memoirs published this week describe a 2009 pre-Budget report whose creation was so chaotic and disunified that it resulted in a complete mess of an economic policy. Read more
Osborne’s problems with the US and Eurozone
Amid the frenetic activity surrounding the response to last week’s riots, a cautiously-written, but telling article by George Osborne and a group of other finance ministers in today’s FT risks slipping by unnoticed.
The piece is moderate in tone, but has the chance to be controversial on a number of levels:
1) It calls for other countries to follow broadly the UK deficit reduction plan. When the ministers write that there should be “credible fiscal consolidation in countries with large deficits”, it is a clear message to western economies: cut your deficits now. Read more
Eurozone turmoil is politically convenient for the coalition
It never looks 
good for a politician to gloat in the middle of the turmoil, and George Osborne isn’t doing that. But he is pointing out, unsurprisingly, that the swift cuts to eliminate the deficit have made bond traders less likely to turn their sights onto the UK.
In the Telegraph today, he writes:
In retrospect, the use of political capital to implement immediate efficiency savings, pass the emergency Budget, agree the most difficult Spending Review for generations and put in place long-term fiscal reforms to pensions was an excellent investment in our country’s economic stability. Thanks to these decisions, the credit rating agency Standard & Poors took the UK off negative outlook and reaffirmed our AAA rating.
Threats to Osborne’s plan to scrap the 50p income tax rate
Is George Osborne planning to scrap the 50p income tax rate? Yes.
But not today, nor tomorrow. Not this month, or next. Not even before Christmas. The move may not even take place next year.
The rate – which applies to those earning £150,000 – has always been classified as “temporary” by the coalition.
In recent weeks the Tories and Lib Dems have played up their differences over the issue. In fact neither think the 50p rate should be removed just now; the internal debate is whether to go for 2012 or 2013.
Danny Alexander insisted last Sunday that scrapping the rate was not a priority – and that lifting the income tax threshold to £10,000 should come first. Tory outriders such as Boris Johnson and Lord Lamont called for it to be axed; but even Lamont said this should happen in 2013. Johnson, meanwhile, is unfettered by the responsibilities of national coalition government. Read more
If tomorrow’s growth figures are bad, ministers will blame global instability
Chancellors have always seen the all-important GDP numbers a day before they are formally published, which makes any event involving the chancellor on that day a fascinating game of bluff and second-guessing.
So what could we tell from Monday’s press conference with George Osborne, which was ostensibly about the UK-India trade relationship?
Osborne walked slowly and confidently into the room, his head held high and smiling. But read nothing into that: others have commented before on how he always manages to grin, whatever storm he is facing. Read more
Osborne kills consumer confidence (but Wills and Kate help restore it)
Top stuff here from Bloomberg’s Rob Hutton (@robdothutton).
Since the coalition government took over, and particularly since George Osborne laid out exactly which cuts he would make, confidence of UK consumers in the economy has nosedived.
Labour level-pegging with Tories: ComRes poll
The latest opinion poll by ComRes is far from heart-warming for Labour, suggesting that the party has lost its poll lead over the Tories for the first time in seven months. The survey was done for tomorrow’s Independent newspaper.
The poll finds that Labour support has dropped two points since the last ComRes survey to 37 per cent, putting the party level with the Tories, whose support has fallen by one point. Liberal Democrat backing has recovered by one point to 12 per cent. Read more
There’s been some chatter in the City about David Cameron’s trip to the Gulf being part of a cunning plan to sell the taxpayer’s bank stakes. Read more
Margaret Thatcher always had a soft spot for David Young, the businessman who brought some “can do” spirit to the old Department of Trade and Industry.
Baroness Thatcher said of Lord Young: “Other people brought me problems. David brought me solutions.” Read more
From the FT’s Money Supply blog:
As far as Britain’s economy is concerned the spending review, just published, changes little. There was the “reprofiling” predicted first in the Financial Times, but it amounted to only £2bn a year of additional gross capital expenditure. This will not make the difference between stagnation and recovery. The Treasury is right: there is no Plan B. Read more
Commentary led by Jim Pickard and Alex Barker of the FT’s political team, Michael Hunter, markets reporter, Gordon Smith, FT.com’s deputy news editor, Martin Sandbu, editorial writer and co-ordinated by Darren Dodd, of the UK newsdesk.
The chancellor sat down in the House of Commons at 1.33pm
JP: Osborne’s stroke of genius is to announce departmental cuts of 19 per cent – just lower than the 20 announced by Labour in March. Let’s wait to find if he is comparing apples with pears.
Average savings in departmental budget to be lower than the average implied in Labour’s March budget. Instead of average cuts of 20 per cent, there will be cuts of 19 per cent per department
Osborne says: “The measures set out today bring sanity to our public finances”
£15.8bn to refurbish schools
Schools budget to rise from £35bn a year to £39bn
More on education: Early years education budget for schools to rise over each of the next four years. New £2.5bn pupil premium for disadvantaged children. And Sure Start services budgets will be protected in cash terms
Now for transport: The cap on rail fares will rise to retail price index plus 3 per cent for 3 years from 2012. £30bn to be invested in various transport projects over the next 4 years. M25 will be widened between 10 junctions. Crossrail will go ahead among other investments in Britain’s transport infrastructure
The BBC’s online budget will fall and it will not expand its activities competing with local media
Pilots of super-fast broadband to be started in the coming months
Now for the BBC: The BBC will take from the government the responsibility for the World Service. The licence fee will be frozen for the next six years
Osborne says there will be £1bn to set up a “green investment bank”
JP: There is a 50 per cent increase in funding for apprentices. But the chancellor isn’t spelling out which schemes will suffer to pay for this – my bet would be the £1bn ‘train to gain’ fund (used to help companies send staff on training).
£220m invested in the UK Centre for Medical Research and Innovation at St Pancras. £200m to be invested in developing wind technology
Now for science: The science budget is protected at £4.6bn a year Read more
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Jim Pickard is the FT's chief political correspondent, having joined the lobby team in January 2008. He has been at the FT since 1999 as a regional correspondent, assistant UK news editor and property correspondent.
Kiran Stacey is an FT political correspondent, having joined the lobby in 2011. He started at the FT as a graduate trainee in 2008, working on desks including UK companies and US equity markets before taking over the FT's Energy Source blog.
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