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The rhetoric of growth

Stephanie Flanders | 13:12 UK time, Wednesday, 9 December 2009

This is a pre-Budget report that's all about the rhetoric of growth - and not "putting the recovery at risk" with over-hasty cuts in spending. But so much for the rhetoric. What about the numbers?

Alistair DarlingWe know that the headline borrowing figures - right through to 2014 - have scarcely changed since April. That would be surprising in any year, from a government that has habitually had to revise its borrowing figures by at least £10bn, even one year ahead. In the Budget, he revised them up by nearly £60bn.

To achieve this result when the economy has done so much worse than the chancellor hopes - and there is so much else going on - is impressive.

Treasury officials had always said, privately, that they had inoculated the borrowing figures against the effects of politically-imposed optimism about the economy. We can't know for sure until we see the full report, but it appears to be true.

If the borrowing figures haven't changed markedly, that suggests that the efforts to squeeze spending - and to raise taxes - to fill the budget hole have not changed either.

Though I will be looking to see whether the balance between tax rises and spending cuts has changed - previously the ratio was about 1:4 - that is, £1 in tax rises for every £4 saved through spending cuts.

However, he may have a get-out-of-jail-free (or get-out-of-jail-less-expensively) card, in the form of a decline in the structural budget deficit. If that shortfall - the bit that won't go away with the economic recovery - has fallen, then he can achieve those headline borrowing targets with a bit less pain. But I can't say for sure until I see the full report.


  • Comment number 1.

    What a sham. A PBR dressed up as an exercise to keep the patient in intensive care whilst he recovers from the battering that he took as a result of a global heart attack. No point in worrying him unduly until he is strong enough to sit up and start taking his medicine. Do these people take us for fools or something? Are we really expected to believe that this period of rest and recuperation is required until the General Election, but after that we can begin treating the ailment?
    The problem of course is that the ailment actually started in 2004 and that whilst the economy grew 8% in the next 3 years, the budget deficit still rose by £100billion. Under this PM, spending has consistently outpaced growth and so the deficit grew. Unfortunately for Mr Brown, he lives in a fools paradise where growth is assumed and so the credit crunch caught him out big time. Now that the chicken has come home to roost, he tells us that he has "saved the world" when the truth is that even in the good times he couldn't balance the books. Same old Labour, same old tax and spend.
    Whilst I am not a great fan of the Eton set (how did we end up with guys like this still in charge? Wonder if the demise of the Grammar school is just a coincidence, Thatcher, Major etc?), the fact is that they are right. The deficit needs immediate attention, election or no election, otherwise we are going to hell in a handcart.

  • Comment number 2.

    Well Stephanie, I think you are ultra optimistic if you think anything in this pre budget is impressive.
    I doubt very much a 4:1 ratio in spending cuts/taxation. It will be the masses, yet again, that will have to bail out this almighty shambles brought about by the few.

    Note the proposed hike in taxes for anyone earning over twenty grand a year. Contrast this with the banks footing the tax bill for those bankers in receipt of bonuses over twenty five grand.

    Three hundred quid scrappage allowance if you update your old central heating boiler! What a fantastic opportunity for the cowboys to inundate us with yet more offers. No doubt quotes will be leveraged to incorporate any cash backs. Who dreams up this stuff?

    Looks like there will still be troughs for the extra long snouts.

  • Comment number 3.

    Probably the most predictable pre-budget report ever - nothing doing. Ever key decision has been shied away from whilst we just sit here waiting for 'growth'. By doing nothing to reduce the budget deficit now we're only going to make it harder to do later. You'd think labour would go out fighting when they've got nothing to lose if not for their own pride but for the good of the country but no they'd rather go out on the pretence that their the saints among the economic guardians of this mess!
    Shall we just file for bankruptcy now?

  • Comment number 4.

    The UK is probably doing much better in relative terms than the majority of the EU Majors................ They are all sitting tight - pretending they don't have tyhe huge problems they have hidden away. Germany and France didn't leverage.??? haha....... they took the USA for a ride with AIG and are afraid to come clean. AIG leveraged their Teir 1 - that was how AIG was on a winner.... it was money in the Bank. :)

    ooh la la. the Anglo Saxon disease..... really. More like sneaky frogs in tin buckets. The disaster has not even begun yet. £ trillion this year to be refinanced.

  • Comment number 5.

    What really struck me were the growth assumptions for 2011 and 2012 at 3.5% apiece. These are truly heroic numbers in the face of a fundamentally weak economy. I expect that the Treasury have been leant on to put in the biggest numbers they dare, so that the borrowing projections are not even worse than they already are. I'm waiting for the inevitable downward revision with the usual limp excuses....

  • Comment number 6.

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


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