The unemployment stats on Wednesday triggered a new round of speculation about whether George Osborne was likely to meet his two fiscal targets: balancing the structural current deficit and having debt falling as a ratio to GDP by the end of the parliament.
Neither target is quite as tough as you might think, however, as the Guardian has pointed out today. On the debt target, technically, the government could borrow billions more than it is currently planning and still not breach it, as long as it slowed borrowing towards the end of the parliament and showed debt was falling by 2015. This is unlikely to happen (partially because it could breach the other target), but it is possible. Read more
We reported last week that George Osborne and Vince Cable were pushing for a new toll road scheme on the heavily congested A14 near Cambridge. Today, the Sunday Times suggests that road tolling will play a central role in the government’s growth review on November 29.
The paper says Osborne and Cable want £50bn from the private sector, mainly pension funds and insurance companies, to fund new infrastructure, including roads, homes and power stations. In return they will get a share of tolls, rents and energy bills.
The problem is that ministers can’t force private companies to spend their money on such schemes: all they can do is put the incentives in place for them to do so. But these carry their own risks. Read more
Last week Andrew Tyrie told The Times the government’s growth strategy was not coherent or consistent. In remarkably outspoken comments, the chairman of the Treasury select committee said policies such as the Big Society or the green agenda were “at best irrelevant to the task in hand, if not downright contradictory to it”.
His reaction to George Osborne’s speech on Monday however had a very different flavour: Read more
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
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
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
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.
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
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
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.
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