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 Article written by Nick Robinson Nick Robinson Political editor

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  • rate this

    Comment number 476.

    No474 Johnto,
    It will take more than gearing down. The fundamental problem will remain as long as incompetent,greedy elements within financial services remain in place.
    The thieving bankers, engaged in robbing their parents, children's charities, taxpayers and mortgage payers et al appear to be still ensconced in the 'City' sewers.
    Time for workers to get off their knees?

  • rate this

    Comment number 475.


    VAT is a beautiful tax as regards collection so, yes, I'm a fan. But 25% is too high. Would hurt people on benefits.


    Lesson there. Let's have Chancellors who are feckless spendthrifts in their personal life.


    Small thinking for big problems. That, I agree, is a theme, both government and opposition.


    Redistribution IMO is all the more important if we're stuffed.

  • rate this

    Comment number 474.

    The banks have to start gearing down,if they don't they will fail.
    The first country to recover will be the ones that start putting up interest rates there by pushing down the house prices,the middle and upper classes won't like it but thats the way it will go planned or not.

  • rate this

    Comment number 473.

    # 468saga
    “That's quite amusing, John. I think you got the down ratings with the 25% VAT. That's about as popular as my 65% income tax. Would the courts allow 25% VAT by the way?

    Yes, the 25%VAT wouldn’t be popular, but earlier in the list I’d made the lowest paid 7% better off.

    Interesting to note though that VAT is 25% in the Nordic states…according to wiki??

  • rate this

    Comment number 472.

    No459 Stan,
    Which one of 'Pasty George's' austerity measures is likely to be most effective in solving our current crisis?
    The IMM, and OECD both seem to be becoming less than confident in his policies.
    Do you agree that a consumer society needs consumers? is there a case for increasing aggregate demand, or indeed a massive redistribution of national income?

  • rate this

    Comment number 471.

    Conservatives tend to be risk averse and the prublic judge them on competence rather than on delivering progress.

    On issues ranging from rail frranchises to workfare their competence is questionable

    But not their inertia despite ambitious attemps to redraw the boundaries of the welfare state.The industrial strategy doesn`t start until after 2015! Hello,you still there?

  • rate this

    Comment number 470.

    He`s always been overrated,Start there and the problems is manageable.

    It`s one of character.Politics is the art of making decisions with imperfect knowledge. You must be able to take risks,and judge the balance between risk and benefit.

    Current policy reduces the risk and the benefit,so we stagnate,always behind events as the policy of shrinking the debt recedes into the future

  • rate this

    Comment number 469.


    "On the whole I think governments (although not all of them and not all the time) spend more wisely than individuals."

    An interesting point. I remember Gordon Brown saying on TV that he wasn't the type of person to borrow money and get into personal debt. This makes his ponzi scheme ecomonic policies and the debt he left all the more strange.

  • rate this

    Comment number 468.

    'My own suggestions can be found @53, easily accessible on the lowest rated page.' - JB @ 460

    That's quite amusing, John. I think you got the down ratings with the 25% VAT. That's about as popular as my 65% income tax. Would the courts allow 25% VAT by the way? Is it constitutional?


    'Stupidity Tax aka The National Lottery.' - jgm @ 466

    You've gotta be in it to win it, though, innit.

  • rate this

    Comment number 467.


    But do your ONS 'hours worked' figures take account of inflation, John? Time is moving faster now so in real terms the 2012 number may be a reduction on 2010.

    h agenda,

    No, the state pension isn't great, but I don't agree that UK governments are particularly wasteful. On the whole I think governments (although not all of them and not all the time) spend more wisely than individuals.

  • rate this

    Comment number 466.

    Most hilarious tax?

    Stupidity Tax aka The National Lottery.

    Odds of 14,000,000 - 1 that pay out an average jackpot of 2,000,000.

    Tee hee.

  • rate this

    Comment number 465.

    433 Sagamix
    "What`s other people`s favourite tax as a matter of interest?"

    Mine was a thing called graduated pension. When I was 19, I thought what a good idea, I pay a small amount each week all my working life, and after 43 years or so, I get a state pension that I can live on :-)
    Of course I was naive: I thought that money would be saved and invested, not all wasted by successive governments.

  • rate this

    Comment number 464.


    IHT is in my top 3. Not my absolute fave, however, since it doesn't raise that much. Re bank reform, killing the bonus culture is IMO key. The crisis was largely behavioural and it was the bonus culture which drove the behaviour.

    John B,

    And the investment banks failed despite their long and relentless poncing off retail and the implicit state guarantee. A remarkable achievement.

  • rate this

    Comment number 463.

    #449 LoM "total hours worked is down & falling by the year"

    The ONS statistics I have show an increase from 916.3 million hours worked to 944.3 hours between Nov 2010 and Nov 2012.

    Do you have evidence for what you write?

  • rate this

    Comment number 462.


    Two good points.

    The thing with Heseltine is that he did after 1992 get to intervene in British industry before breakfast, after lunch etcetera. I was there and it worked. I still cannot like the man but the principle was sound. It was sad that we had to wait until 2009 until Mandelson did the same.

    The UK has to have an industrial policy and not just leave it to mythical markets.

  • rate this

    Comment number 461.


    'My favourite tax: Inhereitance tax as it is a tax on unearned income and helps redistribute wealth more than any other'

    Ah yes. Stealing from the dead. Grave-robbing.

    Although not for the Milibands. Deed of Variance doncha know.

  • rate this

    Comment number 460.

    “My other objection is the reliance on the "magic" of the markets to deliver re-balancing it hasn't worked in my lifetime why will it work now?”

    It won’t unless he goes further with tax reform & does follow some of Heseltine’s interventions.

    My own suggestions can be found @53, easily accessible on the lowest rated page

  • rate this

    Comment number 459.


    Any recovery in the Eurozone will be goods news for UK trade. The recent decline in sterling against the Euro will also be useful.

    Sadly, the Coalition thought, wrongly, that after 2010 that exports would recover as fast as they did in 1992. There was a bounce but not a big one as the structure of the recession is different and the economy is more service based than in 1992. Not good.

  • rate this

    Comment number 458.

    jgm 442

    Ok we get the picture. Imagine there's no tax. It isn't hard to do. No PAYE to steal from us. And no IHT too. Imagine all the people, keeping all their dough ... you may say I'm a dreamer, but I'm not the only one. There's also Jim Davidson and Peter Stringfellow.

    andy 446

    You seem determined for me to have reprehensible motives. Is it because my integrity makes you uncomfortable?

  • rate this

    Comment number 457.

    Labour and the BBC are one and the same,their affiliation with Labour think tanks, full of Labour has beens and their constant discrediting of the Government is all too clear and what's more so safe do they feel in their license fee funded utopia, they forget they are only a broadcaster not the Government and if everyone stopped paying this insiduous fee they would be very poor indeed.


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