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A game-changing Budget?

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Stephanie Flanders | 20:55 UK time, Monday, 21 June 2010

George Osborne may or may not deliver a memorable Budget speech tomorrow - but in two key respects his first Budget has already broken the mould. Because we now have a coalition government, the key decisions had to be taken with a Liberal Democrat in the room. Because we now have the Office for Budget Responsibility, the economic thinking behind those decisions is going to be there for all to see.

George OsborneBy all accounts, coalition government has introduced a degree of discipline to the entire process. "It's the end of government by sofa", was the way one senior official put it to me, with a sigh of relief, when the Budget negotiations were already well-advanced. The need to keep Danny Alexander, the Liberal Democrat Chief Secretary, in the loop meant much less scope for last-minute stitch-ups, or 3am additions the morning of the speech.

The OBR had to be in the loop as well, because it needed to decide how Mr Osborne's policies would affect the forecasts it made last week. If the chancellor announces big new tax increases on Tuesday, the change in the OBR's economic forecasts may not steal the biggest headlines. But they will make for interesting reading all the same.

Looking again through this new body's pre-Budget forecasts, published last week, I am struck by the amount of detail. For the first time, in an official forecast, we have year-by-year forecasts for house price inflation through to 2014-15 - and unemployment. And financial sector profits. We also know exactly what it is assuming will happen to short and long-term interest rates over time.

This is good news for journalists - and a great step forward for transparency. But it also means that we will find out some of the most interesting news in the Budget, after Mr Osborne has sat down. Because only then will we see exactly what the OBR thinks the impact of his tax increase and spending cuts will be on the broader economy.

Of course, the forecasts for growth and unemployment will come laden with political implications - Labour is already flagging up the fact that growth will be revised down next year and probably after that as well. Unemployment may look higher in the short-term as well.

Mr Osborne's people say it's not a fair comparison, because last week's forecasts assumed away any negative bond market reaction to cutting borrowing on Labour's slower pace. The reason is that they used current market interest rate expectations to derive those forecasts for future borrowing rates, which now obviously build in an expectation of Tory-Lib Dem cuts - not Labour ones.

There is something to this, but only Sir Alan Budd knows how important this distortion really is.

You can find many people in the markets who agree with the Conservatives' long-running assertion that Britain would have struggled to find a market for its debt if the old government had stuck to its path for deficit cuts. But you can also find people who think the fear of a run on gilts is overdone.

Whichever view you take, it is just that - a subjective view. Precisely because the road was not taken, we will never know where it would have led.

Only Sir Alan and the other members of the OBR know whether they think Mr Osborne's actions, on their own, will be a net positive for economic growth next year or a net negative, in the short run. My guess - and hope - is the explanation accompanying tomorrow's new forecasts will make it fairly clear.

So much for the (politically interesting) fine print. What about the headlines?

On borrowing, of course everyone will be looking for the chancellor's target for the structural budget deficit in 2014-15, and especially the part of the structural deficit that is not due to spending money on public investment, the so-called structural current deficit.

As I outlined last Tuesday, the latest OBR forecasts have probably left Mr Osborne looking for at least £25bn in further tax rises or spending cuts if he wants to take that structural current deficit to zero over the Parliament. That's a bare minimum. The chances are that the figure will be well over £30bn.

If he wants to stick to a 4:1 ratio of spending cuts to tax increases, he could simply accept Labour's planned tax rises and plan to achieve all of that additional £30bn-plus tightening through spending cuts.

But, we already know he wants to avoid some of Labour's National Insurance increase, and raise personal income tax allowances by £1000. (Kudos, incidentally, to my colleague Hugh Pym, who gave me this piece of Mr Osborne's Budget plans when the ink was barely dry on the coalition agreement, back in early May).

Higher taxes on air travel, and reforming capital gains, can and will help him square the circle. The big question is whether he will need to look elsewhere.

Last week I suggested that the government had many good reasons to avoid a big rise in VAT - even (or especially) one that is pre-announced for next year. After all, that is exactly what Japan did, some seven years after their financial crisis started, with disastrous consequences.

For that reason, I had thought it more likely Mr Osborne announce only a conditional rise in VAT - which would kick in only if certain deficit targets were not met - or that we would see Mr Osborne announce plans to devise and implement a comprehensive carbon tax instead of a rise in VAT.

But, clearly, this is not the accepted view of most - let's face it, any - leading commentators. Either this government has pulled off the most elaborate exercise in expectations management in living memory, or the chancellor has decided he does have to raise VAT in this Budget after all.

However even if VAT does go up, we know for sure that the bulk of the work is going to be done through spending cuts, about which we will surely hear only a few choice nuggets in the Budget. Anything else would be pre-judging the results of all that public consultation over the Spending Review, which is due to reach its conclusions by the second half of October.

The heated talk in Westminster is that this will be a "game-changer" Budget - one that sets the contours for government spending and taxation for many years to come. That may well be true. But it feels like we've had a lot of game-changing statements from British chancellors in the past few years.

Arguably, it was the pre-Budget report for 2008, with its devastating revisions to the scale of UK public borrowing long into the future, which truly set us on the road to this point.

It's worth remembering that around two-thirds of the "tough choices" being announced by the chancellor in this Budget have already been sketched out by his predecessor, in the past few Budgets and pre-Budget reports.

Yes, Mr Osborne's first Budget speech will be another step in the road toward decisions and policies which will indeed change our government - and our economy - for years to come. And yes, he will be giving us some important signposts for what is to come. But we're not there yet, and nor is Mr Osborne.

As he - and Alistair Darling - know well, the really tough decisions don't come in setting the headline spending totals, but in deciding how, exactly, they are going to be met. On that larger task, this government has moved further than its predecessor, with its £6bn spending cuts and its lists of cancelled projects. But when Mr Osborne sits down on Tuesday he will still have barely begun.

Comments

  • Comment number 1.

    Another down-payment on the sins of the bankers and the politicians who made it all possible.
    The media will examine all the numbers and compare this cut from that without every reflecting on the causes of all of this. In the near future there will be stories of human suffering all caused by the cuts and no mention or reminder that the banks and their political handmaidens caused it all. There are no ethics in government, banking or big business...just accept that..it is the world of today. All the charts and editorials are hollow because they refuse to address the real issues and kow-tow to wealth and power and what does it matter if the little guy takes another one on the chin. The 21st Century looks a lot like the 19th.

  • Comment number 2.

    "This is good news for journalists - and a great step forward for transparency. But it also means that we will find out some of the most interesting news in the Budget, after Mr Osborne has sat down. Because only then will we see exactly what the OBR thinks the impact of his tax increase and spending cuts will be on the broader economy."

    This is good news that we will have greater transparency in future budgets, rather than trying to hide the worst parts in the small print as we have previously endured. No doubt there will be screeches of bias whatever comes from the OBR. Personally I am looking forward to it.

  • Comment number 3.

    It will be a game-changer, not least because we finally have a serious Government trying to deal with the real issues, not one looking to invade Iraq, and spin, spin, spin, spend, spend, spend

    Grown-up politics

  • Comment number 4.

    There needs to be some analysis of the payday that the Government will have when it sells its shares in the the banks. Thuis will repay a significanyt part of the borrowing so is the level of debt that serious?

  • Comment number 5.

    The bankers, of all shades, have taken control again with the "new" governance for fictitious wealth and debt, rather than the lives of people throughout this nation, Europe, the world. The Lib-Dem participation in the "coalition" is what - Clegg, Cable, Alexander desperate to be seen fronting Tory policies. Their gain the possibility of electoral reform that will not get an extra Lib-Dem MP, and tax relief for the lowest earners that will be phased in over 5 years, or disappear slowly in the mainia for budgetary cuts. The annonimous OBR, economic experts, defining the nation's accounts and forecasting future realities, and getting projection on growth and government debt wrong in their first casting of the runes.

    All the same collection of monetary experts who were unable to control their own remit during the largest financial collapse since 1929. The Bank of England, with its own gathering of experts, who swing with the political wind direction. One moment saying the economy will collapse if the banks are not bailled-out; then pouring huge amounts of fictitious money into the system, via the banks, to save the nation from unemployment. Only to turn with the new northerly draft to back dessimation of working lives throughout the nation, but especially the north and north-east.

    Great furore is made about unsustainable public sector pensions, how the private sector is supporting the overblown public sector. One point could be made concerning pensions of bankers, who had/have non-contributary pension schemes; subsidised mortgages; inflationary bonus schemes that rewarded failure as much as success. The other could be made about the considerable pension holidays taken in the private sector in employer contributions, and the resultant compulsion on many companies to now make good that shortfall in payment (paid for by reducing employees salaries or mass sackings). Finally, what proportion of the private sector dependas on the public sector for its business? Suppliers of all things medical; educational; building; infrastructure; transport, the list touches all industries. What of the retail industry that presumably needs the private sector employees penny as much as the private contribution. As can be seen across swathes of the country when large-scale employers are removed the smaller providers in the locality fail - any major High Street in the various old industrial areas of Britain demonstrate the effects of swinging cuts made without thought of repercussions.

    It is interesting that the very organisations, the "rating organisations", that gave Lehmann Brothers' debt packages AAA ratings now set nations' bonds as "junk". Like a gambler they are playing the market, making fortunes out of national misery. No surprise that John Major declined a seat in the Lords in preference for the boardroom of a hedge fund. That George Osborne agreed his budget proposals with a collection of previous Tory Chancellors is no surprise - that the leaders of the Liberal Democrats should ensconce their party, reversing the major part of their menifesto pledges, must surely have repercussions in the next election. In all of this the only beneficiaries will be company boardrooms; bank boardrooms; the Conservative Party on the demise of the Lib-Dems. Its wonderful what can be achieved when a group of old pub(l)ic school boys get together.

    Anybody for emigrating, I hear Iran is a reasonable nice place in comparison with Britain 2011.

  • Comment number 6.

    @1 - 1. ghostofsichuan wrote: "Another down-payment on the sins of the bankers and the politicians who made it all possible."

    They didn't actually. It was made possible by people who stupidly and continually bought things with credit cards in the full knowledge that not only were they buying on credit because they didn't have the cash, but that tyey were also going to have to stretch to pay the minmum payment on the card - idiots. It was made possible by people who stupidly continually borrowed against notional equity in the falsified value of a house, it was made possible by people who stupidly took out 125% LTV mortgages thinking they were being clever, it was made possible by people who stupidly believed that a 'property-owning' democracy was not only viable but desirable.

    Wasn't the banks and politicians who got the country into this mess - they aren't clever enough. Their sin was to be so stupid they couldn't see how stupid most ordinary people were. They were daft enough to think most people weren't greedy and short-sighted.

    Next time dear readers just remember, if you believe what politicians and bankers say about the future then you are truly thick and you deserve everything that happens to you. If paying for something - even on credit - is a monumental struggle, then you can't afford it.

  • Comment number 7.

    Cut Public Sector Pay By 25%

    Put Vat up to 25%

    Put toll charge's on all roads

    Raise Tax on Petrol and Diesel

    No more wasting money on motorways let the obese lazy onks walk or get bikes.

    DC and NC have the Courage and bring the troops home from Afganastan we all know its another Vietnam. Stop doing the Greedy USA's dirty work why should our brave young men and Women loose their live's for the greedy USA arms industry to make profits.





  • Comment number 8.

    Oh this is wonderful! Multi-millionaire puppets of ‘the City’ carrying out the right wing, extremist biddings of their shadowy internationalist financier masters who worship money, wealth and power to the exclusion of all else. There is no debate… Their profit system must remain intact at any cost and it must function to allow them to receive only the profits, for private usage, while ALL LOSES MUST BE PLACED ON THE TAB OF THE TAXPAYERS.
    It really is okay for enormous amounts of the working population to be traumatised, bullied and manipulated as long as the rich, and their minions, are never challenged and allowed to amass enough wealth to hold the financial (and ‘political’) system to ransom to their own peculiar ends.
    LONG LIVE PROGRESS!!!

  • Comment number 9.

    Jeff King #7 suggests a 25% pay cut for public sector workers:

    Based on average salary of £25,000 the 6,000,000 £5,000 seem tempting (£30bn), but then there is the £6bn in lost tax revenue. So is it worth closing all hospitals; schools; police stations; fire stations; colleges and universities; passport offices; courts; town halls and most prisons for the £24bn saving. What would you expect to happen to the military forces?

    Tolls on all roads, now that is a nice little earner, until you then factor the charges into the costs of transporting goods around the country. Likewise, any increase in fuel costs will increases prices in shops everywhere.

    No more motorways - what about the ever increasing costs of railway maintenance and devlopment - what about the cost of repairing potholes for those you would force onto their bikes (a la Tebbit)?

    Pet gall and vitriol rarely leads to reasoned thought - how about just taxing bankers' pay and bonuses; dodgey transactions; share dealings and currency dealing scams; closing all tax avoidance/evasion schemes? Voila, we have filled the Exchequer to bursting; the sale of our stakes in RBS and Lloyds Banks and we can all live the life of Riley (though at present life in Ireland under their austerity measures is somewhat bleak). The notion that Labour created this problem is to hide the comparison between us and our near neighbours, where workers have not had pensions guaranteed by government (employers closing industries over-expanded in the "bubble" leaving mass unemployment and empty pension funds). Or how about Spain with 20% unemployment, they are not all public sector workers, with decline in earnings comes decline in all industries and economies that rely on the excesses of others (with the exception of Banks where Santander is planning to purchase swathes of RBS, probably with loans in similar fashion to Kraft and Cadburys).

    Just like boy George, it bit of reflection on consequences before rash actions/statements, or do you think the country would be better governed by the John Terrys of this world?

  • Comment number 10.

    Red Lenin #6:

    It is all our fault for being advised by financial experts; the media; junk mail to buy what was unaffordable. If you go to a doctor (public sector worker) you expect some notion of knowledge and personnal attention. Why should it be any different when approaching so called financial experts; mortgages at 125% of property value sold on the back of property inflation of 10-15%; financial experts espousing equity release, credit card hopping, etc.

    I'm old enough to remember previous financial "golden geese"; endowment policies (where final bonuses were always dependent on the market and not a guarantee - unless ofcourse you had a policy with Equitable Life and boy George is Chancellor). What about the great opting-out of pension schemes - the annuity bonanza, everybody to have luxury in later life? What about the great auction of the national silver - utility companys sold for a pittance in relation to even their property portpholios (Gas, Electricity, Water, Transport, Natural resources, all now mainly owned by foreign interests). In private ownership the vast resources in the North Sea that would have given Britain energy independence well into this century were sold for quick profit to Europe. Compare that with Norway who maintained national control of their resourceas and now provide 30% of our natural gas.

    When Joe/sephine Public is told the goodlife is here, exampled in all they see, wealth on a string, instant celebrity, magazine shelves filled with symbols of what the mundane can achieve (Big Brother, X factor, Britain's Got Talent?) all saying look any idiot can become wealthy. Why else would anybody put up with the excessive work-practices of most companies in Britain, the arrogance of directors and managers flaunting perks while chastising greedy workers for wanting "more". The problem is that the majority of our institutions, be they private or public, are governed by 7% of the population who have no contact with the realities of the remaining 93%. How can the multi-millionnaire boy George have any understanding of the implications of his financial theories, he barely got his PPE for goodness sake?

  • Comment number 11.

    I have completely changed my mind!

    We have to show proper deference to the markets. I have come to this conclusion because I have recently calculated the public sector debt as a percentage of CTN, and I am truly shocked.

    We need to keep Debt%CTN at a fixed level (say 3%) so that the CRAs have proper confidence in the UK government's ability to 'finance its spending'!

    For those who don't understand basic economics, CRA = Criminal Ratings Agency, and CTN = Charlie's Telephone Number!

    In order to do this we have to make those tough decisions that only those with the ability to abandon their consciences can take, and make as many people unemployed as is necessary to make sure the private sector can pay the low wages, that the remaing people should be grateful to receive!

  • Comment number 12.

    #8 Politicalgoose2

    "Multi-millionaire puppets of ‘the City’ carrying out the right wing, extremist biddings of their shadowy internationalist financier masters who worship money, wealth and power to the exclusion of all else."

    That is certainly one way of looking at it, which would be invalid if the chaps in the ConDem administration were seriously considering a raft of radical reforms, on a global basis, such as the following, recommended by Dr Paul Jorion, the French-based Belgian public intellectual whose influence is spreading in the francophone world:

    1. Abolition of stock options, which have been a major factor in the stagnation of salaries since the 1980s and have led to businesses becoming focused on short-term considerations related to movements in their share prices and are at the root of the generalized financiarization of the world of production.

    2. Legislation of the Glass-Steagall type to divide financial institutions into two distinct categories: on the one hand those dealing with credit and general intermediation (commercial banks) and on the other hand those which confine themselves to dealing with their own funds (investment banks).

    3. Abolition of betting on price fluctuation. Forbidding pure speculation, this would force investment banks into activities of a socially useful character, which would mean bringing an end to 80 per cent of their current activities, thus releasing significant funding for the real economy sustainably and enduringly.

    4. Immediately initiating a Bretton Woods II to fill the gap which the conceivably imminent collapse of the euro would create and to sort out the overall disorder in the financial system, with a view to creating coherent economic zones (kept in balance so far as exports and imports are concerned) supporting regional currencies. International commerce (and the circulation of capital) could be regulated by means of a Chamber of Multilateral Compensation evaluating transactions between economic and monetary zones in a clearing currency such as the bancor (proposed by Keynes).

    That nice Mr Osborne could announce that he is going to get together with other finance ministers for the purpose of reaching agreement on measures of this nature in order to prevent a recurrence of the sort of crisis which has overtaken us, and, of course, pigs might fly.

  • Comment number 13.

    Thanks Steph, Nice post and its nice to see your still working at 10:55 the night before a budget like a proper economics editor should be, its good to see some of my TV license is worth while.

    Before I start I'll let you bash me for what I am rather than letting people make presumptions I'll admit that I am a bit left wing and a public sector employee and only earn about 18k a year however I have a degree in economics and work in the finance department of our Local council so I feel I can see things from most angles even with my political leanings.

    Okay so now you know where I'm coming from lets look at the situation, we have a huge deficit that needs to be dealt with so cuts are going to be made no matter who is in charge as there is a limit to how much tax can be collected before it just becomes more sensible to avoid no matter what the risks. So lets deal with the cuts that are ofcourse needed first.

    Public sector pensions - the unfunded ones need a serious rethink and should never of existed as they were always going to recreate a situation where they start off paying the government and therefore the tax payer but then would become to huge and lead to the tax payer paying for them. The government cannot reasonable cut past obligations so in order to deal with them the rewards for future contributions should be reduced to a level where they are sustainable or just converted to funded schemes, this means that there will be a large deficit in them for many years to come due to past obligations which will just have to be live with but will reduce over time. Funded schemes like the LGP scheme are fine so long as they are adjusted regularly to take account of the pay outs compared to the contributions.

    Bank - The damage here is done and there is no real way around it, the government should of paid off the the private debt to give the banks liquidity rather than just giving money to the banks this would create increased retail damand as people see reduced debt and repayment interest but labour messed but badly so we have to hold the shares till they atleast break even but these shares can be used to offset some of the debt (its not all due to the banks but a fair few 100s of billions is ) when we sell them. The bank levy is a good idea, its basically interest on the money we gave them rather than taking dividends for the shares.

    Public sector - This is too big simple as that even as a public sector worker I know this and acknowledge this. There is a lot of waste but this is the important part we can't just cut in straight lines on this (previous posters on stephs blogs that just put things like "cut public sector by 15%" deserve a slap for their lack details) There needs to be a systematic overhaul of services and some services would have to be cut completely (possibly mine, although they would have to reduce the red tape greatly and expect virtually 0 statistical returns to cut much from my team, this would be fine with me I'd be pretty hopefully of finding an alternative). As stated by many Qaungos really have to go I don't know 1 that does anything that someone else isn't already doing in whatever service they are looking to improve or reduce. Certain lesuire services also have to go they are great but running on a tread mill can be replaced by running round your local neighbourhood, dance classes can be replaced by actually dancing for real. Services have to be cut but stay away from services that will never be serviced by the private sector as they are porvided for the public good rather than profit (care, some social housing, education, street services, rubbish, police, fire, ambulance service)

    Benefits - A huge cost but alot of very nessacary costs, these need to be provided on a basis of need not life style choices, no benefits for children after the 2nd, cap maximum benefits for everything but serverly disabled (there can be some huge costs envolved in providing for these people a cap could stop them living never mind having life style choices). I would like to cut nearly all benefits for familys above 30k but fear that the cost of means testing would be more than the reduced costs so would need to see some sums on this. And ofcourse we need stricker rules on who gets unemployment benefits I have worked for a training company that worked for jobcentre plus training unemployed people and have seen those that want to learn and get skills and those that want to spounge all there life, so I would say that job interview attendance should be decided by the advisor and not the individual and feedback from the job interview should be given to the advisor as this would help them either advise the applicant or to stop benifits as the person just wasn't even trying

    Public Sector Pay - This is a hard one for me as I work in the public sector but I must, given the current circumstances, agree that a pay freeze is needed for atleast a few years and would put a few pay cuts in there for the high paid officals(including MPs) just because some are on ridiculas pay compared to the work they do. Also I would possibly reduce the pay of the lower paid workers by maybe 2.3% which was last years increase (me included) I would also have a serious reveiw of T&C as I know a lot of horror stories where pay deals have been done and have had distarous consquences when they have come through (I know nursary nurses in my area that were meant to be removed and made to teaching assistants by making there pay based on 46/52 weeks a year like teaching assistances rather than 52/52 weeks and to stop people losing out they increased the grade of the job but then the deal fell through so they got increased grades but reduced number of weeks)

    Tax - Higher earns should pay higher taxs than lower paid people its that simple, they got lucky thats the be all and end all, there are plenty of hard working people out there that have dragged themselves out of the the gutter and put in the hours and congratulations to your I respect that work ethic but they are still lucky not to be born with some disabilty that would of prevented this. They should keep the higher 50% rate of tax and bring back super tax at maybe 75% for 1 mill + a year earning and greatly reduce the right offs allowable. Also tax businesses at a similar level so self employed people can't get round tax so easily, this will hurt some but will mostly stop people getting some nice household goods/cars/property at a reduced cost rather than paying tax on them as goes on at the moment.

    Wars - Lets get out as quick as possible, sorched earth technique on the drug barons lands in afganistan to remove all their funding.

    Foreign Aid - Stop it to all but the most needy of nations and insist that any country that recieves in does not have spending plans that include space programs and nuclear weapon development programs.

    SORRY I know that was a long rant but I just wanted to make things clear on where i see the situtaion before complaining/complementing people.
    So conclusions - con-dems are looking at cutting to heavily and in the wrong places they have cut investments in future revenues already and from the glimses of what we have seen of the new budget plan to to so even more, the £1000 increase in the income allowance is very welcome but is purily a con trick so they can point to that when people complain about major cuts in services that are necassary for people to live a decent life and tax rises that will hurt the poor most they should of introduced a super tax and reduced the level of tax avoidance in self employed individuals.

    They have also fooled us badly, cameron said things are worst than we imagined but when his OBR produced figures, if you actually read them the forecast a growth of 2.6% and a reduction in the deficit from 8.8% to 2.8% if we stuck to labours plans as steph said in an earlier blog. Thats actually pretty damn good and WAY beyond what I had imagined I though maybe is we were lucky we would get a bit of growth (2.5%) but no growth or maybe half the deficit and 0 growth. In reality would this outcome be so bad, a very good step along the lines of deficit reduction while having acceptable growth in the economy seems pretty good to me.

    Why are the con-dems insisting to cut things by an even greater amount when we have very good debt ratings, a very low level of civil unrest, a very good level tax collection, and a very fragile economy.

    P.S. Sorry once again for the lenght of the post

  • Comment number 14.

    Morning Stephanie,
    a Game-Changing Budget, I think not.
    It will be the usual, increase duty on alcohol, Fags, petrol, increase in personal allowances from APRIL 2011 (why not now?) with the corresponding claw backs of Tax, reduce child benefit payments (including tax credits) increase in CGT (with taper relief). No mention, apart from in general terms will be made about public spending cuts (awaiting a full report in Oct). Increase in VAT (to 19%).
    I cannot get a correct tax code from HMRC and I've had four issued this year so far (with no change to my circumstances since 2009) so good luck to anyone with more complicated tax affairs.
    Once again, I believe that we will be overtaken by other world events which will make this Budget all but irrelevant.
    The price of oil will rise again to $150 per barrel (US), war mongering will start again over Iran (where it will be claimed, regime change is necessary). War is another possibility over oil rights in the Falklands.
    QE will be proposed again since the last lot worked so well, Capital ratios for the banks will be increased and more "stress tests" will be proposed by Adair Turner who refused to publish the details of the last lot in 2008 because of market sensitivity which apparently doesn't apply to european banks as theirs will be published.
    All this change going on but for the ordinary Joe, everything remains the same.
    No, I think that this will be an interim budget until the real one in April 2011.

  • Comment number 15.

    Cookie,
    I read about three of your paragraphs, and broadly agreed with you. I doubt if anyone is going to read more than that, and if they did they would have to comment-back with as long a comment as you have made.

    Just for your information, though I do broadly agree with you, especially the last paragraph.

  • Comment number 16.

    Cookie,
    Don't agree with your comments about Benefits. When people act as if they don't care whether-or-not they get a job, this is called 'over-compensation' and usually means they have lost so much confidence and self-respect that they over-compensate for this by acting as if they don't care. Once you realise this, you can find ways around this. When you do, they will show you who they really are and give you a chance to help them.

  • Comment number 17.

    In view of the imminent austerity measures does anyone else think its a strange time for the Metropolitan Polics to annouce that future recruits will have to work for free for six months in order to get onto the gravy train?

  • Comment number 18.

    Why all the obsession with the so-called "independent" OBR. This was formed in December 2009 with Conservative-inclined economists and low and behold they come up with forecasts in line with Conservative thinking. What a surprise! Sitting in the Treasury this is little more than another government department. Why should we have such confidence in them given the record of economists in predicting the recession.

    For those of us who have seen 60+ years what we are going to get is pure and simple Thatcherism dressed up as something else. This is not necessarily bad but can it be achieved with "fairness". I very much doubt it in the present climate. There is too much doctrinaire politics around which is only to be expected when we have leaders, like their predecessors, who have never worked in the real world like the rest of us.

  • Comment number 19.

    This budget will be a reflection of how badly the financial services let us down and how badly Labour handled the economy generally. We've done something about Labour but what are going to do about the financial services sector?

  • Comment number 20.

    One of the major problems that we have today started with a Tory government who took Britain into a supposed' Common Market. Today regardless, we save 60,000,000 pounds stering - a day; at a stroke, if / when we leave the EU.

  • Comment number 21.

    #20. denzuki1 wrote

    "we save 60,000,000 pounds sterling - a day; at a stroke, if / when we leave the EU."

    Absolute pernicious rubbish and simply WRONG. I'll informed illogical and financially illiterate!!!!

  • Comment number 22.

    Cookie @ bakersdozen

    Perhaps the growth forecasts have been highsided and liabilities lowsided by bully boys. There is always uncertainty on forecasts which allows a bit of lopsided pick and mix. The issue is growth but nobody talks about it much, I wonder why. As far a exports go, currency has been 'devalued' but has simply returned to levels with the USD in place historically. I can remember pricing US imports at 1.43 to 1.46 USD to the GBP in the 80s. UK Manufacturing has declined decade on decade. Work still is leaving the UK for low labour areas. If exports do not pick up the implication is further drops in the pound long term. NuLabs model is shown to be little more than stupid so we have to pay. Lets hope paying works otherwise we will all have to pay again. PS quite how you expect to succeed with benefits by stopping payments to people who can't be assed to seek work that they know is not there I dont know. Quite appart from the statutary provision. However I would agree that workfare looks likely if that is your proposition as that functions within the statute as far as I can see. However I would not like the task of skill matching the reluctant ('paid' less than the minimum wage) to tasks which will be limited in content, would you. Note - As the statute and case law is something like a pile of paper a metre high I believe, I would hesitate to say I understand it and have not even read it, thankfully.

    Re What NuLab said etc. Your faith in what politicians say is touching, as most manifestos go straight in the bin once elected, including NuLabs 1997 one. However I suspect cutting will occur in this case. Because it has to to some extent or other. I do find the idea that simply cutting the deficit is enough of a task is odd but very prevalent. The running and rising total on the debt remains to be tackled once the deficit is eliminated to return to 'GO' and pick up 200 pounds. In the meantime the debt total rises year on year. And if there is no growth then watch out as there will be a need to throw a double six to get out of jail free and we will not have the dice, somebodyelse will be holding them.

    Incidentally I think the CGT issue has been interesting. It says that probably HMG think house prices have to fall and bluster about CGT revision affecting houseprices downwards cuts no ice. Could be wrong.

  • Comment number 23.

    I don't go along with the 'game changing' idea of any budget. Politicians just respond to the figures to the best of their ability and sometimes for ideological reasons. (That is £1000 on the personal allowance!)

    Today we are unlikely to see much more than a very small actual change in the overall debt or the projected debt (of 1.4 £tn at the end of the parliament.) The key thing is to be seen not to frighten the horses - whilst appearing to take vengeance against the bankers!

    More important is the case in New York where Barclays is being arraigned for do a 'sweet' deal that under-priced Lehman's by 11 $bn! Here we are seeing the way that Banks actually operate - not fro anyone's benefit but their own!

    Of to fill up with fuel - just in case!!!!

  • Comment number 24.

    VAT rise no, Carbon tax yes - at least the latter is relevant and has a progressive character especially if domestic tariffs are not set to charge high for the first part of consumption. A reduction in VAT combined with a comprehensive carbon tax will just right!

  • Comment number 25.

    It is all our fault for being advised by financial experts; the media; junk mail to buy what was unaffordable.
    ---------------

    Hilarious. Financial experts did NOT advise anyone to spend what they did not have.

    The Credit card people did, so did the sellers of course but then you all knew that they were only trying to sell their goods and still did it.

    It is all your fault (I for one don't have a credit card, mortgage, hire purchase options adn the like. Only a student loan, tht I could pay off tomorow if I chose to do so, acquired so that I could get a job and pay more taxes) for overspending. Don't blame anyone else.

  • Comment number 26.

    At last the merry go round of spend,spend,spend may come to a stop as one responsible government attempts to address the lending problems we have got ourselves into. Too many people seem to think that government money is some form of fairy tale money that appears from nowhere instead of understanding that we,as taxpayers,all contribute and have to take some responsibility for the wasteful expenditure and control the snouts in the trough that have mushroomed over the last few years.

  • Comment number 27.

    #3. At 10:00pm on 21 Jun 2010, Kevinb wrote:
    "It will be a game-changer, not least because we finally have a serious Government trying to deal with the real issues, not one looking to invade Iraq, and spin, spin, spin, spend, spend, spend

    Grown-up politics
    "

    Sweeping statements like that are OK when you have the cash to repay your mortgage as you have admitted in a previous post Kev.

    Many of us are sitting here with baited breath to see if we have jobs.

  • Comment number 28.

    22. At 09:30am on 22 Jun 2010, YellowBrickRoad wrote
    'The running and rising total on the debt remains to be tackled once the deficit is eliminated to return to 'GO' and pick up 200 pounds. In the meantime the debt total rises year on year'

    So how exactly does the system work if it doesn't? I am keen to understand this. It might take quite some time to erase our debt through trade surplus don't you think? How else are you thinking we might do it?

    How much money would be left in the system if we got the debt down to zero? Who is owed this debt?

  • Comment number 29.

    If banks lend fifty times what they have to lend that must mean they are lending what does not exist. Government interest payments could be cut to nothing by telling the banks that they are owed nothing except fictional money.
    I hope the G20 discuss co-ordination of international moves in this direction as it will need to be synchronised between countries.

  • Comment number 30.

    #10 >>If you go to a doctor (public sector worker) you expect some notion of knowledge and personnal attention. Why should it be any different when approaching so called financial experts; mortgages at 125% of property value sold on the back of property inflation of 10-15%; financial experts espousing equity release, credit card hopping, etc.

    If you don't know the difference perhaps I can elucidate !! A doctor is one who is *examined and qualified* by professional bodies and is under stringent rules professionally !! So called financial experts are in no way under any stringent rules; if they were, they would not have been allowed to make all those ridiculous and extravagant claims !!

    If you can't tell the difference, then it's Cavaet Emptor !!

  • Comment number 31.

    Yes, it could be game changing. It needs to be. Dave was telling us the Conservatives have changed. I didn't feel confident of that at Election time. But there have been some interesting moves, generally, already and I'm starting to feel a little more confident in this Coalition thing. I like some of the things they have done.

    The next two hours will be critical. It could be the same old, same-o from the Conservative led Coalition but there are signs that the LibDems are giving them some really good input and balance. I hope they get it right and bring some fresh thinking and action to the economy and our fiscal structure.

    GO George, but hey - let's be really careful out there today.

  • Comment number 32.

    25. At 10:28am on 22 Jun 2010, hackerjack wrote:
    It is all our fault for being advised by financial experts; the media; junk mail to buy what was unaffordable.
    ---------------

    Hilarious. Financial experts did NOT advise anyone to spend what they did not have.


    ===============================================================

    Not entirely true, I think, as sub-prime selling was not an exclusively US phenomenon. And our credit card companies and those from overseas allowed to operate here were very lavish with offers and credit limits, etc.

  • Comment number 33.

    18. At 08:59am on 22 Jun 2010, John Everson wrote:
    For those of us who have seen 60+ years what we are going to get is pure and simple Thatcherism dressed up as something else. This is not necessarily bad but can it be achieved with "fairness". I very much doubt it in the present climate. There is too much doctrinaire politics around which is only to be expected when we have leaders, like their predecessors, who have never worked in the real world like the rest of us.

    ------------------------------------------------------------------
    Not necessarily. Some 'Thatcherism' got us into our present mess. We need to move away from it to a better model. Dave has promised us no more Thatcherism anyway. We have to wait and see whether he and the Coalition are as good as their word.

  • Comment number 34.

    A game changing budget would take into account international competitiveness and energy sustainability as drivers of new growth industries. China build £1 trinkets and nuclear power stations, and have the access to resources to keep doing it for themselves and the developing world. Thats what we have to compete with, and simply attracting investment from the BRICS, is akin to saying 'let us look after your money (???!!!!) and you can have a cheap factory over here' who is the developed economy again?

    I am apolitical, and i view this a repeat of the same mantra - Lower red tape on business, lower tax on business (who have been effectively bailed out) and 'remove waste'.

    None of this addresses the core problems we have as a nation - increasing energy prices that seep into all of our activities and consumption.

    No mention of inflation or money printing, or the introduction of sustainable industries to employ unemployed and youngsters.

    Until you address cost of living, and making it low for all people in a society, there will forever be the yin-yang, black white duality that keeps us locked into a zero sum game. We are better than this.

  • Comment number 35.

    #19 Wee_Scamp I share your concern about the financial services sector!

    The government still hasn’t shown any real backbone with what it intends do the bankers, the short sellers, and the hedge funders.

    Can or should we have any real confidence of building ourselves a better future until the government have properly sorted out these flawed foundations. We need more of a layer of ‘blue brick’ banks as opposed to ‘blue chip’ ones, that are integral and water-tight as opposed to the chalk and lime we build our last castles upon – that’s why they came crashing down around our ears.

    If the foundations are not properly laid without these flaws, we’ll all be sitting in the ruins again in another 10 or 15 years from now.

 

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