George Osborne chooses his words carefully

George Osborne George Osborne gave only the broadest sense of the tough decisions he will take over coming months

There was some politics in George Osborne's speech on Monday - as you would expect, at a party conference. But no policy fireworks. And he gave only the broadest sense of the tough decisions he would be taking in the months ahead. That's probably not surprising either.

The difficult reality for Mr Osborne is that the coalition has been struggling to deliver on the two goals that were right at the centre of its economic strategy: growth and deficit reduction. Put simply: the lack of one has made the second a lot more difficult.

As I have previously described in detail, these problems are going to come to a head in the next few weeks, because the Office for Budget Responsibility (OBR) is likely to have some bad news for him.

If the independent forecasters are right, the OBR is almost certain to tell him that he will not be able to meet his debt target - that is, to have the stock of debt falling as a share of GDP in 2015 - without additional tax rises or spending cuts, before the election.

If the FT's economics editor, Chris Giles, is right, the OBR is also likely to tell him (again) that the structural hole in the public finances is larger than previously thought, meaning even more austerity is required, well into the next parliament.

Last year, Mr Osborne decided to put off additional measures to fix the deficit until after the Budget. The betting in Westminster is that he will do the same again in December's Autumn Statement. But this time, that is likely to have the extra consequence of forcing him to abandon, or suspend, his debt rule for 2015.

Were there any clues to that in Monday's speech? The simple answer is no. In fact, he did not mention either of his two key fiscal targets in his speech.

To be fair, he didn't mention them in last year's party conference speech either. It's not that kind of moment.

No 'growth'

But what about the coalition's core objectives: economic growth and the "deficit reduction plan"? They have each played a prominent part in previous speeches by Chancellor Osborne.

You might be surprised to hear that he didn't directly mention either of these terms on Monday. As many of the Twitterati have noted, he didn't use the word "growth" at all.

Some will say he didn't mention them because he cannot be sure of achieving either growth or deficit reduction in 2012. The economy will probably be smaller at the end of the year than it was at the start, while the government's deficit so far in 2012-13 has been running about 20% higher.

Or, perhaps, we're all reading too much into his choice of words. Either way, the next few weeks are unlikely to be a fun time to be chancellor.

Stephanie Flanders Article written by Stephanie Flanders Stephanie Flanders Former economics editor

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  • rate this

    Comment number 24.

    Labour, of course, would claim to fill that 'structural hole' by ending the redistribution(ugh!) of tax credits and replacing them with the pre-distribution (ugh! ugh!) of a living wage but when will they have the magnanimity to admit that the public spending splurge of tax credits in the good years-a major part of the 'structural hole' they handed George Osborne-was grossly negligent?

  • rate this

    Comment number 23.

    GO attempted to make sitting on his hands sound exciting.

    A budget deficit reduced by 25% this parliament and 1m new private sector jobs. New share ownership for employees of small companies to cede employment rights will be a blessed relief to them. Still no growth & looming budget problems.

    We should be very grateful for small mercies. Birthday suit, or am I not fit: Emperor's New Clothes?

  • rate this

    Comment number 22.

    SF Alan Clarke's upcoming piece on the might be in for a surprise ( in case you don't know he is the NO 1 rated UK economist...unlike you

  • rate this

    Comment number 21.

    As the government overspent for years it will take a long time to put right and with other countries that we trade with having difficulties gives no room for quick fixes. For the next few years it will be just doing no more damage.

  • rate this

    Comment number 20.

    Very well put! - It is possible to track most of Britain's current economic problems down to the very earliest days that New Labour started its UK open door floodgates immigration debacle & EU surrender mess
    One day we may get a news media operation to replace the BBC and use some of that £3.3 bn to explain growth properly & give us the real details with some nice graphs etc

  • rate this

    Comment number 19.

    If he's not careful he will have a whole generation of savers who will not vote for him let alone solve the defecit. Interest rates are kept low sucking more young people into the property boom. Older people have been paying off mortgages and saving to preserve wealth. In the last few months interest rates on saving have fallen 60% and bonds 40%. Savers cut back as rates fall and less tax is paid.

  • rate this

    Comment number 18.

    I support any attempt to reduce benefits but any action he takes will need to be retrospective (take too long) or he risks having people dumping their kids on the councils doorstep and / or once again seeing our towns and cities burn. If he taxes the rich they will leave. We are paying the price of bad politics and lack of planning for the last four decades.

  • rate this

    Comment number 17.

    heres the reality of looking for work. my friend was made redundant-she has just applied for a job,they told her they could not guarantee there would be hours every week. if she came off benefits and then there was no work she would have weeks with NO money-she has a child to feed and no family to borrow from in the weeks there is no work! Some employers are offering ridiculous contracts!

  • rate this

    Comment number 16.

    Why do we allow people to only pay tax on income derived from this country but in the US you pay tax on all income regardless of where you earnt it in the world. All companies like Amazon should pay tax on all goods sold in this country and not be allowed to put it abroad in a country that with a lower rate. Why are we still paying more for goods that although manufactured here are cheaper abroad?

  • rate this

    Comment number 15.

    GO offered a tax break for workers who gave up their working condition rights in exchange for shares in the private companys they work. This was tried by Mrs T in the 80's at GCHQ! The difference this time is that workers know what will happen, once they have given up their rights they will be made redundant and will have no rights to appeal what has happened. WAKE UP BRITAIN BEFORE ITS TOO LATE!!

  • rate this

    Comment number 14.

    BBC forgot to mention how 'growth' is being measured here?
    If BBC is still obsessed with Labour GDP prattle perhaps Ms Flanders can enlighten us whether growth differential is within the error tolerance of ONS GDP estimate?
    There are many ways of measuring growth - the key measure that really matters is one of 'sustainable and long term growth' & upon which the BBC has - like Labour - 'no idea'

  • rate this

    Comment number 13.

    " the OBR is also likely to tell him (again) that the structural hole in the public finances is larger than previously thought"

    No Steph, the correct wording is that it has become larger than it was previously. Why? Because Osborne's policies and additional contagion from Eurozone mainly, are turning non-structural into structural with every passing day.

  • rate this

    Comment number 12.

    The first thing that any government must show before cutting wealfare is that the whole of society is playing the game on taxation and that means that all profits produced in the uk is paid as it is earned and that includes all of the multi nationals who are based abroad who seem to be able to throw our governments a pound or two i see no men of vision of any party who seem to have a clue.

  • rate this

    Comment number 11.

    I watched Osborn's speech on N24. Its no wonder things aren't getting better he was lacking any ideas apart from the ideology that Mrs T's way of sorting things out was better for us than Heath so its the Maggie way for him.

  • rate this

    Comment number 10.

    The government spends too much because it lets business off payingits due taxes. Wages did not keep pace with previous growth and as Fascist Economic theorist Tim Nox of CfPS shows - Metro 8th Oct, p4 - wheeze is the jolly wagging tail of excessive profit. What can be done about human nature is a very different proposition to reporting it properly. People squirrel stuff away. Their nuts... :-)

  • rate this

    Comment number 9.

    People on benefit are also consumers so it follows that cutting benefits has the effect of shrinking the ecomony and putting even more people out of work. I would let everyone who wants to claim benefit ,but they would then have to pay tax at a higher rate in the ponnd.

  • rate this

    Comment number 8.

    His problem is the treasury hasnt worked out how to change the way the figures are calculated for growth, for it to show as a positive.

    Obviously they are too busy changing other calculations....

  • rate this

    Comment number 7.

    A tough decision for Osborne would be to go after 'big business' - Vodafone will do as an example - and their tax avoidance. But he will not do that. Nope. None of the decisions he is making right now are 'tough' for him.

  • rate this

    Comment number 6.

    on way of cutting the benifits budget is to get the unemployed doing the work of the 3_700_000 immigrants and then they would not be required and the benifits bill would be massively lower

  • rate this

    Comment number 5.

    The Tories and Mr Osborne seem to be making all their decisions within the self-imposed constraint that their main political campaign contributors (top level financial professionals in financial companies in the City of London) can never loose.

    In a deleveraging environment that's an impossible constraint to have without sacrificing other sectors to feed banks since less debt means smaller banks.


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