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Two dates and one figure

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Stephanie Flanders | 10:16 UK time, Wednesday, 22 April 2009

Two dates and a figure will tell us most of what we need to know about today's Budget.

The first key date will be when the chancellor expects the economy to return to positive growth. In November he was hoping for the summer. Now it is likely to be early next year - but the timing will be important. The latest consensus forecast is for modest growth in 2010 of 0.3% - but that consensus is falling fast. If the chancellor comes in below that, or even with negative growth for next year, he will be able to say he is being cautious.

Alistair DarlingA slower return to growth will spell bad news for the borrowing forecasts. We learned this morning that net borrowing for the 2008-9 financial year was £90bn - a little less than experts such as the Institute for Fiscal Studies had been predicting but still £12bn higher than forecast in the pre-Budget report last November. The figure for this year and 2010 will be higher still - at least £160bn.

Growth deferred means debt piled up. As we know, that purely "cyclical" borrowing is not the chancellor's biggest problem, because most of it should go away by itself as the economy recovers (though it does raise the long-term cost of servicing the public debt).

But if the economy is going to return to trend later than forecast, that will at least mean that he can push forward the date at which he expects to get the debt ratio under control.

That is the second date to watch for. In November Alistair Darling said he would stabilise debt and balance the current budget (excluding investment) when all of the global shocks of the past two years had worked their way through the economy. Back then he thought that would be 2015-16.

Look to see how far he pushes that date forward today - and remember that the further away it gets, the further it will be going into not the next Parliament, but the Parliament after that.

And finally, that figure I'll be looking for? Of course there will be plenty to choose from - for example, the level at which debt is expected to peak as a share of GDP, which the chancellor reckoned would be just over 57% in November. I would be surprised if he doesn't raise that by at least 10 percentage points today, probably more.

But the number I'm going to single out is the forecast real growth in total spending from 2011-2016. In the PBR he was looking at average real terms growth of 1.1% a year during that period. Will that turn into a real freeze in spending, which would undoubtedly mean real terms cuts in spending for services that people care about? We'll have to wait and see.

It is possible he will keep that figure unchanged - after all, why make things any easier for the Conservatives than you need to? But he will need a fairly convincing story to tell the markets if he does, inevitably involving tax rises. All will be revealed at 12.30 today.


  • Comment number 1.

    "The first key date will be when the chancellor expects the economy to return to positive growth."

    But what are the main drivers for growth; where will the growth come from? For example, if exports are one of the main drivers, then define which exports to which customers? There is too much woolly evasive language on the prowl these days, which all adds up to no information. It gives the impression that politicians haven't got the first clue about the economy....

    PS - you don't need to put the word "positive" in front of "growth".
    There is growth and there is contraction, decline, dwindling, shrinkage, decrease, falling, etc. To say "negative growth" is like saying "negative laughter" or "negative happiness".

  • Comment number 2.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 3.

    No.2. Blackcardmen01

    I see you've had your "luxury" credit card withdrawn by the moderators.
    Over-spent already, eh?

  • Comment number 4.

    If debt peaks at 67% of GDP wouldnt this be determined as "Excessive" under the Maastricht bases? The deficit is already excessive. So, are we now flouting the fiscal rules of EU?

  • Comment number 5.

    MrTweedy (#1) "There is too much woolly evasive language on the prowl these days, which all adds up to no information."


    "It gives the impression that politicians haven't got the first clue about the economy...."


    They're anarchists. They gave control of the economy away to markets and told the FSA etc to light-touch regulate (and short-staffed them to ensure this). We have such sinecures everywhere these days. That's 'freedom'. ;-)

    Still, what do I know? Even quoting them verbatim back at themselves doesn't work - it just eliicts classic Oppositionally Defiant responses (or sulky silences followed by distractive subterfuges when they hope you've forgotten). :-(

    Anarchists eh.. who'd 'ave 'em... :-(

  • Comment number 6.

    Stephanie, I can't wait to hear all the wonderful language of Darling to hide the obvious. I really do hope he refrains from putting the word negative in front of a positive verb or positive in front of a negative noun. I remember a long time ago when Pan Am made a fiscal statement that they had incurred their first "negative profit". A year later they filed for Chapter 11.

    Could history repeat itself? Over to you Darling...

  • Comment number 7.

    All the treasury forecasts have been wrong so far, so why should today's be any different?

    They are playing for time hoping that the massive transfer of wealth from prudent savers to the wilfully indebted will at some point soon reflate a property bubble that can provide the all-important feel-good factor at the next election.

    In connection with the political short-term survivalism of the current UK government, did you see the truly weird performance of GB on YouTube yesterday: unco-ordinated grinning, twitches, sudden frowns and general instabilty. He reminded me of Humphrey Bogart in 'The Caine Mutiny'!

  • Comment number 8.

    No.5. JadedJean

    It's all eckanomics these days.....

    When we are shown empirical data it's usually months out of date.
    And, the government and BoE have proved themselves incapable of forecasting.
    Then there's the notorious time-lags, random shocks and unintended consequences, which only come to light 6 months after it's too late to address their cause.

    The anarchy of experts running the country with a soft-touch and their feet up on the desk, relying on a risk based approach which never flagged up any risks, which meant that no inspections were ever made, and no-work-necessary was always the order of the day....

    Add to that, "NFI" which stands for no-forthcoming-information, or no-factual-idea if you want to be polite.

  • Comment number 9.

    Current predictions are based on expected recovery from injury already suffered in the explosion of the home real estate mortgage collapse and the inverted pyramid of bets (leverage) based on most of the insane loans to wanna-be homeowners being paid back. But financial analysts say there are more ticking time bombs out there which are likely to detonate as well. I'm aware of four, there may be others. Commercial real estate. The bond market. Credit card debt. Emerging markets. Each of these has the possibility to send new shock waves towards what is already a very shaky financial ediface. Every time a large institution makes an assessment of what the extent of the damage is that has already been done and what it will take to recover from it, it looks worse than the time before. The IMF assessment this week is four trillion dollars. A year ago, there were predictions that there would be no recession, then that if there were one it would be short and mild. Then with the collapse of Lehman Brothers, the bottom fell out and the world's credit market froze solid. Those who lament the US government allowing Lehman Brothers to fail should consider that if they hadn't, it would have happened anyway because there were so many of them, AIG, Merrill Lynch, Citigroup, you could name a litany of them. They wouldn't even lend to each other overnight. Why? Because each one knew that the others were doing exactly the same thing they were doing and couldn't be sure the borrowers would still be around the next morning to pay them back. Suddenly after decades of demanding that a loan based on a real estate asset be judged on the appraised market value of that real estate as collateral, banks didn't want any part of it when they were the owners of the real estate. I'm not fooled. Banks will look better because the regulators in the US have now given them free license to lie about what those assets are worth hoping the "feel good factor" will revive the economy. It will only make it worse once again deluding bank shareholders and creditors to banks that they are far stronger than they actually are.

    I'm still waiting to see some of the two trillion dollar bailout the US government has promised hit the streets. So far, business activity as I and everyone I know sees it, is continuing to slow, at least where I live in the New York City metro area. If this goes on much longer, in a year you'll be able to buy any new car you want for $6000 if you can pay for it in cash. There are 180 acres of them sitting on the pier in San Diego alone because dealers around the country refuse to take delivery on them, they are stuck with so many and so much financial debt of their own already.

  • Comment number 10.

    What part of there is no money do this government not understand? OK we have all played monopoly and uderstand the game but this is not a game, one day we will have to pay up and that will be with real money. None of the pundits have any answers that stack up, few saw any of the problems that have increased our problems. and I see no one in the government that fills me with any confidence that they know anything, I call them the KNOW NOTHING PARTY as over the past 12 years they appear to have no idea about anything and lack any real experience in any area that we really need to recover from our current base.

  • Comment number 11.

    MrTweedy (#8) "Add to that, "NFI" which stands for no-forthcoming-information, or no-factual-idea if you want to be polite."

    Some of us have, for years, been trying to drive home the implications of our (late in the day perhaps) realisation that behaviour is largely the expression of genes (which are inherited through assortive mating), and of our changing/deteriorating demographics of the Liberal-Democracies, paradoxically, through too much equalities and especially with respect to 'education', for some time now - yet like those mythical lemmings, we keep throwing ourselves into the abyss. It's most odd. Every time I see someone wanting to argue wth the numbers it fills me with despair. Do they have any idea what a TFR is? Every day more journalists pour out their environmentalist ekanomics without a thought to the ceteris paribus clauses. I hope Stephanie is listening. To have written that economics journalists didn't see it coming when so many were ringing alarms, is just a little hard to take, as it means they were only listening to their Lysenkoist selves.... This requires some radically uncomforting thought outside what most people believe as common-sensical - i.e that we go to school to improve our chances or ability.

    What matters is that we can't turn sows' ears into silk purses, or even Bull-Terriers into Labradors (hence the end of revealing KS3 SATs and Ken Boston's annoyed remarks yesterday?).


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