George Osborne

Jim Pickard

Before Andrew Tyrie became chair of the Treasury select committee I predicted that the Tory MP would make a tough and independent figurehead for the body. This has so far been the case.

This morning he put the Chancellor of the Exchequer on the spot by asking whether he had exaggerated the scale of the financial crisis facing Britain to justify massive public spending cuts. Read more

Anyone walking past the main Treasury entrance today now will see a white sheet of paper stuck to the wall, which is supposed to cover up some graffiti.

A rather big and burly security guard has been given the job of fending off photographers and making sure no one sees what is behind it. Read more

Jim Pickard

The chancellor said on Wednesday:

“We will fund a major improvement in our flood defences and coastal erosion management, that will provide better protection for 145,000 homes.” Read more

This was a remarkably opaque spending review given all the fuss the coalition makes about transparency. There were no figures for public sector net-investment, much to Chris Giles’ annoyance.

There were also no calculation of combined cuts to department budgets, covering resource and capital spending. This was not beyond the wit of the Treasury — indeed the table was at one stage in the review. Osborne’s team have kindly passed it on so we can finally publish what they left out. It gives a much better idea of how cabinet ministers fared. Read more

This was always a problem George Osborne would be unable to solve. As a result of this spending review, pensioners next year will receive £600m less in winter fuel payments.

Does this break the Tory pledge in the election? Not quite. When David Cameron made his read my lips campaign promise, he vowed to “keep what we inherit” on winter fuel payments, free bus passes and other benefits to pensioners.

Most people would have expected that to mean that he matched the same payout as Gordon Brown.

But the Treasury accounts are a funny thing. As I disclosed in August, Brown only booked in a payment of £2.1bn in 2011. The additional £600m was his Christmas bung, a festive gift to show how munificent a leader he was. It was a one-off that he re-announced every year. Read more

Jim Pickard

When George Oborne addressed the cabinet this morning his message was the usual one about trying to make the cuts as fair as possible and to “fall on the broadest shoulders”. The chancellor admitted that this was an “anxious time for some in the public sector” who could now lose their jobs.

Lord Adonis meanwhile claims in this morning’s FT that “Whitehall is stunned and morale risks plummeting” as the cuts reality dawns. This chimes with what I’m told by several civil servants who read this blog.

Many departments are already going through a redundancy process – instigated in June – even before the new £83bn wave of cuts which will see an estimated half a million public sector jobs go.

I am told of one leaving party for BIS staff, held in a local pub, which attracted three or four hundred attendees. The atmosphere was utterly morose. Meanwhile some civil servants are receiving letters giving them only a week to decide whether or not they want to leave. As for those who are quitting, there are rumours that they may not be paid their redundancy payments until the end of November – a six week gap. “It feels really chaotic,” one tells me. Yet this is only a foretaste of the cuts to come. Read more

The axe is hovering over the £4.2bn council tax benefit bill. The details are patchy, but I’m hearing speculation that it could be cut by as much as 10 per cent. If it doesn’t emerge as one of George Osborne’s welfare savings today, it was certainly one he closely considered.

A cut is likely to involve some complex changes to some eligibility rules that are already incredibly complex. The rebate is currently paid to people on low incomes: lone parents, jobseekers and around 3.5m over-65s who are mostly on pension credit. But it is impossible to neatly sum up the criteria. Read more

It is now received wisdom in Westminster that Liam Fox emerged victorious from his battle with the Treasury over defence funding.

The official history has David Cameron making a last minute intervention to boost defence spending, particularly for the army. The Treasury were only able to secure cuts of around 8 per cent in real terms, rather than the 10 per cent cuts they were pushing for.

The alternative interpretation is that Fox was short-changed and that this will become clear in the months ahead. The argument runs in two parts: Read more

George Osborne’s cut to child benefit has triggered a bit of a debate over welfare handouts and procreation.

This is usually a bit of a no-go-area for politicians. But Jeremy Hunt has been brave enough to suggest that long-term benefit claimants should “take responsibility” for the number of children they have. Fraser Nelson, meanwhile, has dug up some numbers on the 2,500 incapacity benefit claimants with 6 or more kids.

This all reminded me of one of my favourite Gordon Brown stories. There were about 45,000 extra children born as a result of Brown’s largesse with benefits, according to economic research. It is a whole generation of “Brown babies” identified by the Institute of Fiscal Studies.

People appear to have taken his fiscal stimulus literally. Big increases in tax credits and income support payments pushed the birth rate to its highest level since 1974. The “price” of an extra child fell for many low income families along with the financial penalty of staying at home as a mother. Working class had more confidence to have children — or at least have them earlier. Read more

There’s been lots of speculation over the Treasury’s plans on sickness benefit. The Times flagged up a proposal to “means test”, while the Observer has a letter pointing to £2.5bn of incapacity benefit savings from an unspecified reform.

No final decisions have been taken. But reading between the lines, it sounds like moves are afoot to scale back “contributory incapacity benefit” (which I’ll explain in a second).

If so, it blows a rather big hole in George Osborne’s claim that a he’ll be finding savings from ending the “lifestyle choice” of those determined to “pull down the blinds” and scrounge on benefits. These reforms largely take money from people who have worked and fallen ill, rather than those who’ve allegedly chosen a life on the “sickie”. Read more

Jim Pickard

In the run-up to the general election George Osborne scored a big propaganda coup by enlisting the names of scores of business leaders in a letter criticising Gordon Brown’s planned rise in National Insurance.

(No matter that in Osborne’s subsequent Budget VAT went up by a similar amount to help plug the fiscal hole).

For Labour that stung; not least because some of the figures had sat at various times on its own advisory boards. David Miliband has since said, on several occasions, that he never wants Labour to enter a general election campaign with no business support. Read more

Jim Pickard

In a keynote speech at Bloomberg HQ on Friday Ed Balls will lay into the coalition in a way that exceeds anything we have heard before.

He will warn that “a hurricane is about to hit” Britain’s economy, in the most dramatic warning yet by a Labour politician that the coalition’s deficit reduction programme could prompt a double-dip recession.

Balls will label George Osborne, chancellor, as a “growth denier”, who is ignoring warning signs of a global slowdown. Read more

The axe is hovering over the £2.7bn winter fuel payments. But cutting this bung to the over-60s is harder than it seems. Even if Osborne decided, say, to pay out £600m less than Gordon Brown, it would make no contribution at all to cutting the deficit.

How so? The Labour wheeze was to top-off the winter fuel payment with a one-off bonus each year, which was presented as a Gordon’s munificent Christmas gift. Last year it amounted to £600m. The Budget books doesn’t expect this bonus to be repeated, so the future winter fuel payments are only scored as £2.1bn in 2010, not the £2.7bn actually spent in 2009.

The dilemma for Osborne is:

– Find an extra £600m from savings or increasing debt to pay out as much as Brown in 2009, or

– Take the political hit from withdrawing £50 off all pensioners (and £100 off all those over 80), without any upside in terms of deficit reduction.

 Read more

Kiran Stacey

Vince Cable faces some tough choices on getting banks to lend

Vince Cable

Government officials told the FT over the weekend that today’s bank lending paper would be “very green” – essentially laying out a set of problems rather than solutions. And so it has proved.

The first 12 out of 39 pages deal with “context”: basically facts we already knew. It is not until page 13 that we get any concrete policy suggestions. And even then, they are couched in very cautious terms. Read more

The Office of Budget Responsibility faces a big credibility test today. Chris Giles, the FT’s economics editor, has an agenda-setting story that raises doubts over its very purpose and independence. It is far more significant than any speculation over Sir Alan Budd’s departure.

Through persistent questioning, Chris uncovered that the OBR tweaked its Budget forecasts at the last-minute to erase around 175,000 public sector job losses by 2014/15. Read more

Now this is odd. Since George Osborne and his axemen entered the Treasury, far from cutting the school building programme, they’ve actually allowed it to swell.

Around £1.5bn of additional contracts have been signed since May, a billion of which came in the last 21 days. Given departments are facing average cuts of 25 per cent, you have to wonder what on earth is going on. Read more

George Osborne sits down at 13.28 – that’s it, the Budget has been delivered. Now Harriet Harman will respond, but thank you for comments and for joining us.

Jim Pickard, political correspondent: Osborne’s promise to return to “financial prudence”… Could this be a dig at Gordon Brown by any chance? This was in happier days his favourite expression.

Jamie Chisholm, FT Global Markets Commentator: Gilts back to where we started, down 8 basis points at 3.45 per cent. Sterling little changed.

Child element of tax credit to be increased

Matthew Vincent: The chances of exchanging contracts on your second home by 5.30pm today look a bit remote. Best phone your solicitors and give them the hurry up…

Robert Shrimsley, editor of Is it my imagination or is George Osbrone saying “coalition government” much more now that he’s got to the nastiest parts.

 Read more

The unions, Ed Balls, the Taxpayer’s Alliance, Tim Montgomerie and Guido have all come out against a rise in VAT.

The possible flaw in their argument is taking the tax rise in isolation. They’re assuming every option for spending restraint is an alternative. The brutal fact is we’re probably going to implement all the cuts they can think of, dream up a few more, and raise taxes. That’s how big the hole is.  Read more

Our economics team ran some tests to show the regional impact of cuts and illustrate the challenge of eliminating the deficit without punishing the poor.

If you cut social security payments by 10 per cent, for instance, they found the poorest areas were hit hardest. Household disposable income fell by 3.6 per cent in Merseyside and only 2.1 per cent in Berkshire and Buckinghamshire. Read more

This is one for the geeks but a telling sign of how power gnarls bold promises on transparency.

For several years, Chris Giles, the FT economics editor, has tirelessly pushed the Treasury to come clean over their fiscal forecasts so the country is told the severity of cuts expected to total departmental spending. Read more