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 244.

    If govt borrowing & public sector excess spending & waste is taken out of eg 2005/06/07 real GDP figures - current real GDP is better than any of Labour years.
    BBC like idiot IMF & other media obsessed with tiny movements in global GDP comparisons as PRE-INFLATION when GDP is only at very best, an estimate & as double counts many internationalised 'GDP' transactions & debt is 'GDP drag' on UK

  • rate this

    Comment number 243.

    I wonder what is next in regard to the persecution of the unemployed and the poor ? I wonder if they will all have to wear badges on their lapels soon identifying them as unemployed or poor and also end up all being moved to Ghettos in the Midlands? - Stoke etc. I wonder also, how long before we he the slogan work makes you free ,being bandied about?

  • rate this

    Comment number 242.

    #241 they only place these jobs will vcome from is thta of SUSTITUTION of the jobs that the uncontrol imigration since 1997 has "robbbed" the UK nationals of and a given them a life on the dole

  • rate this

    Comment number 241.

    The next few years are unlikely to be a fun time for us plebs never mind a few weeks for GO!
    Automatic stabilizers with high unemployment mean lower tax returns and higher benefits surely even GO can understand this!
    UK needs jobs to reverse this austerity trap. Waiting for devaluation and inflation to improve UK performance is a longshot!

  • rate this

    Comment number 240.

    239 plan A was flatline the core economy with a low exchange rate (that worked) expecting an export led recovery (that didnt). It could have bought time to deflate assets. Now were just stuck with the flatline. The problem however is how to deflate the assets without causing a even bigger demand crisis. The only way is serious debt write offs - bankrupt banks. Takes a brave man to do that.

  • rate this

    Comment number 239.

    Osborne still doesn't get it!

    The GDP reduction multiplier is more than 1 (not the 0.5 they used). So he is crushing the UK economy and us.

    The REAL problem he does not understand is that until money returns to being prudentially priced capitalism itself will not bring about a recovery - arithmetically it simply can't till interest rates rise substantially.

    Spain has a better outlook than us!

  • rate this

    Comment number 238.

    Stephanie: surely you, an economist, can warn the wider UK that the obvious flaw in all these plans to force people off benefits and into work is that there are NO JOBS to go to. It's blindingly obvious... as is the other fundamental flaw: there is no demand - hence, for example, half a billion fewer litres of fuel used Apr - June. Yes, just think how much tax that lost the gov't. WAKE US ALL UP!

  • rate this

    Comment number 237.

    233 cont

    Taper relief replaces indexation allowance for individuals, which can still be claimed for assets held prior to 6 April 1998 from the date of purchase until that date, but was itself abolished on 5 April 2008

    and which Party held Gov.? Any - I think it should be reversed back to CGT at their highest marginal rate of income tax (0%,10%,20% or 40%

  • rate this

    Comment number 236.

    If the government really believes in "entrepreneurship", lets ask if they will introduce 100% inheritance tax, and a universal low percentage wealth based tax for all. That would level the playing field for all and those that were successful could successfully claim they made their own wealth. And if not, why not?

  • rate this

    Comment number 235.

    Second thing is to cut the civil service. A single flat tax on all income, single flat benefit to all legally here is a good start. Scrap every NHS job containing the word 'manager' is also needed (1.5 million employed 0.8million doctors&nurses).

  • rate this

    Comment number 234.

    Great idea. However we were sold a lie that Globalisation would benefit us all by providing us with ever cheaper goods to buy. Unfortunately that meant outsourcing jobs to China etc. And the extra profits made were not shared in any significant way, they simply increased firms profits and boosted executive pay. Who REALLY benefits from 'open markets' and the removal of 'trade barriers'?

  • rate this

    Comment number 233.

    231 CONT. Historical (useful if looking at years prior to April 2008)

    or a "non-business asset" and the length of the period of ownership. Taper relief provided up to a 75% reduction (leaving 25% taxable) in taxable gains for business assets, and 40% (leaving 60% taxable), for non-business assets, for an individual.

  • rate this

    Comment number 232.

    The first thing this buffoon should do is the one thing none of his predecessors had the balls to do... scrap EVERY contract that involves spending ANY UK tax payers money on ANYTHING that isn't made by BRITISH people in BRITISH factories in BRITAIN, If the UK government needs it then the UK people should make it.
    Then scrap payments to the EU and 'overseas aid' both of which help our competitors

  • rate this

    Comment number 231.

    228, 226, 218
    Historical April 2008 Individuals paid CGT at their highest marginal rate of income tax (0%,10%,20% or 40% in the tax year 2007/8) but from 6 April 1998 were able to claim a TR which reduces the amount of a gain that is subject to CGT (reducing the effective rate of tax), depending on whether the asset is a "business asset" or

  • rate this

    Comment number 230.

    The casino bankstas dumped us in uncharted territory

    Traditional economic solutions won't work on this scale of debt & asset price bubble

    The lobbyists have successfully "convinced" politicos the status quo is the only way

    It isn't - & sticking with it only works for the 0.1% who created the Ponzi schemes in the first place

    Another "none of the above" (s)election ahead

  • rate this

    Comment number 229.

    Why as a country ,are we all just sitting back and allowing people like Osborne , to have jobs like these? As it must be glaringly obvious,even to the most die hard conservative voter , let alone the rest of us , that this person is totally out of their depth and utterly clueless.

  • rate this

    Comment number 228.

    "226 it's not going to sit too well with 50%>45%, CGT > and Benefits cuts."

    CGT cuts? Under Labour the rate of CGT was a maximum of 18% for individuals. The Coalition increased that to 28% for higher rate taxpayers. How is that a cut?

  • rate this

    Comment number 227.

    Osborne's economic plan relied on private sector growth to soak up the unemployment created by his public sector cuts and provide the revenue needed to pay off the structural deficit.
    He talked himself into a corner over his strategy to placate the 'markets'.
    His plan has failed and it is only a matter of time before the 'markets' start raising the interest premium on UK lending.

  • rate this

    Comment number 226.

    IIRC, there may be some embarrassing statistics coming out at the end of the month with details of the pay of directors of quoted PLCs including the FTSE. If these are double digit (excluding bonuses) it's not going to sit too well with 50%>45%, CGT > and Benefits cuts.

    GO might want to book a couple of weeks holiday around that time ...

  • rate this

    Comment number 225.

    The Chancellor’s proposal as set out in his conference speech has about as much detail as a child’s sketch of a cloud. There are several employment law issues that have not even been addressed (of which there are plenty, but here are 2: employers could simply give their employees a token amount of non-voting shares; or vote to amend the classification of shares later on


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