Can George Osborne break free of events at crucial pre-Budget meeting?

Chancellor George Osborne

Today may turn out to be the day when the most significant economic decisions of the year are taken.

This is the day when the chancellor and a small team of senior civil servants and political advisers gather at his country retreat Dorneywood to discuss what to do in the Budget on 20 March.

Having battled their way through the snow, Team Osborne will find a warm welcome awaits at the Queen Anne-style mansion set in over 200 acres of Buckinghamshire countryside. The housekeeper will, no doubt, welcome them with tea and freshly baked scones by a roaring log fire.

But when the Treasury's top mandarin Sir Nicholas Macpherson makes his presentation, the news he will bring is likely to be as chilly as the weather outside.

Sir Nick, a languid old Etonian with a sardonic sense of humour, is a veteran of such occasions.

It was at Dorneywood in 2008 that the permanent secretary to the Treasury peeled an apple with his pocket pen knife and broke the news to the then Chancellor Alistair Darling that borrowing was set to rise over £100bn, Darling cheered himself up by going to a concert by that muse of the miserable Leonard Cohen.

Today the news looks scarcely more cheering.

The lack of growth has seen borrowing rise this year, not fall as planned; the target George Osborne set for repaying Britain's debt looks like a distant dream; the age of austerity has already been extended to at least 2018 and now the Institute for Fiscal Studies is warning of the need for £12bn in tax rises after the next election.

The question today is how will Osborne react. Up until now he has relied on the loosening of monetary policy by the Bank of England - which he hopes the new Governor will take much further - and schemes to encourage the private sector to invest in building homes and the nation's infrastructure.

Critics argue that he should allow borrowing to rise even further in the short term to directly fund capital spending. His answer has always been that an extra £10bn, say, of spending would produce no noticeable improvement in growth, whereas loss of fiscal nerve would cause panic in the markets.

On the face of it then, the chancellor has few options at Dorneywood. However, George Osborne will not want to appear to be like the other people who use his country retreat when he is not.

The house in which he and his advisers gather today is used to de-brief and to rehabilitate British citizens who have been held captive abroad. Many of the country's most famous hostages have stayed here before enjoying their freedom.

Will the Chancellor find a way to break free or will he leave Dorneywood a hostage to events?

Nick Robinson, Political editor Article written by Nick Robinson Nick Robinson Political editor

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  • rate this

    Comment number 16.

    To cut or not to cut?

    If you have an old car that has broken down, does cutting back on spending for repairs make that car run any better?

    If you have an old house that has a leaking roof, will not spending on roof maintenance improve the situation?

    You have to spend money to improve things, and once the situation has improved, then make cuts to payback debt.

  • rate this

    Comment number 15.

    Osborne has said, planned nothing, to bring debt under control over next 4, or 40 years. All UK bank depositors are protected to £50k, BUT there is NO protection against the trend towards a govt default that manifests in high inflation, then hyper inflationary which will shred hard-earned savings.
    Osborne offers same-old, same-old and the dire consequences thereof.

  • rate this

    Comment number 14.

    We can be sure of one thing. Its the poorest and the hard working middle classes who have saved for their futures who will be Osborne's target. Roll on 2015 when we can consign him and his rich cronies to the bin of history which will not look kindly on him - but does he care- not with all his millions of course he doesn't

  • rate this

    Comment number 13.

    City of London and its Bankers - are they the REAL enemy of the British People?

    Some of you think they are not - so please explain why the ONLY group and part of the economy that it still paying absurdly high salaries and bonuses is that group while the the rest of us suffer disproportionately.

    Justify crucifying the people on the alter of the bankers!

    (Don't just vote things down - speak!)

  • rate this

    Comment number 12.

    To break free of anything he'd have to assert himself over his Treasury civil servants and his LibDem coalition partners in order to cut spending and reduce taxes. He hasn't managed to do either in 2.5 years, so I doubt he's going to start now.

  • rate this

    Comment number 11.

    The tories need to take ownership and stop blaming external forces,by slashing public services,the people suffer.People saying he is moving the country in the right direction mustbe living somewhere very nice.Get out on most sreeets and see how bad it now is.Keeping big business happy seems to be their priority,big business that does not pay tax.However does provide directorships for ex MP'S.

  • rate this

    Comment number 10.

    It was totally predictable that bertie woosters ideologically motivated cuts would make a bad situation worse - cutting off the life blood to a weak economy just starting recover.

    Now pretty much everyone - except the tories - knows we need growth not cuts.

    I hope wooster remains trapped by his ideology - only hope for us is for the economic collapse to continue to 2015 so we can be rid of them.

  • rate this

    Comment number 9.

    Oil/gas prices (dominant commodities of index funds) have ignited markets of all indexed commodities = commodity bubble. Wheat (usually trades in the $4 to $6 dollar/60-pound bushel) has topped $25. Worldwide food price has risen 83%.
    Why isn't Osborne leading the way to a solution on commodities? People are suffering; banks are profiteering. Sound familiar, or just disgusting.

  • rate this

    Comment number 8.

    Poor economic performance in the UK increasingly has less to do with "events", and more to do with Osborne's incompetence.

    Gideon should have stuck to folding towels for a living.

  • rate this

    Comment number 7.

    Osbourne has to hold his nerve, and carry on the direction we are already heading. It is the right direction, but it is being held up by "world" economy events being slower than anticipated to have an up turn, Europe (most of it) spiralling further into recesion, and the slow down in China.
    This means it will take longer than hoped (yes - hoped!) but will in the long run be beneficial to the UK.

  • rate this

    Comment number 6.

    Better Q.

    When will Osborne concentrate on his REAL job (of election strategy) and quit his part time job as Chancellor? 2 yrs to go so his main priority must now be Tory strategy! (He will make a mess of it too!)

    Roll on a National Government (of all parties) who at last take on the real enemy of the country the City of London and its bankers.

    ps. Give us back the IHT exemption rise! NOW!

  • rate this

    Comment number 5.

    This Slasher of the Economy is hostage to his own Political dogma and incompetence. What other Slasher can boast of having increased DEBT by 58% in only 33 months, and barely reduced Public Spending. This useless govt is maxing out the Debt Credit Card, and intent on leaving future generations to clear up his mess. What a heavy price to pay for such incompetence.

  • rate this

    Comment number 4.

    Osbourne SAYS borrowing to spend would produce no noticeable improvement in growth. He's right! Does he have the nerve to tackle the real problem?
    International Swaps & Derivatives Association, of which Goldman Sachs is leading member provides little to no protection. Similar legislation is on the table at the EU, but UK GOVT HAS OPPOSED EFFECTIVE CONTROLS.

  • rate this

    Comment number 3.

    Osborne is in epic denial about the effects on the economy and public finances of his austerity programme. So he adopts the Einstein move - let's have more austerity. Osborne needs to break free of the dogma of Micawber moneynomics and reflate the economy. Dont pay public sector workers to do nothing on the dole - pay them a bit more to continue producing value and spending.

  • rate this

    Comment number 2.

    We could stop spending money covering Amazon's tax bills and paying First Capital Connect to put together bids for rail lines... That'd make quite a difference.

  • rate this

    Comment number 1.

    In a world where Goldman Sachs Made $400M Betting On Food Prices while hundreds of millions starved, will Osborne have the nerve to tackle commodities? Estimate: Goldman brought in a pay/bonus package of approximately $396,500 for 2012.
    This is another reason why derivatives bubble is so bad for the world economy. Goldman Sachs & other big banks are treating food supply as chips in casino.


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