Today’s Budget was disappointingly predictable. Faced with the worst post-recession recovery in living memory – our current malaise even outstrips the Great Depression – many were hoping for the Chancellor to see the light and spend more in order to get growth going.
Unfortunately, the highly political George Osborne again put his own interests in front of what would be best for the country. An expansion in public sector investment, which would be modest relative to the sharp cuts imposed when Osborne first started running the economy, would not spark bond market vigilantes to dump UK debt; indeed, credible organizations such as the IMF and NIESR argue that it could actually improve the debt-GDP ratio. But the paltry infrastructure measures announced in the Budget – amounting to Â£3bn ( just 2% of GDP) and even then spread out over several years – will have no discernible impact.
Instead, Osborne stuck to his tried and tested method of coming up with interesting gimmicks. Unlike last year’s omnishambles, I suspect more of these are likely to stick this time around. There are national insurance cuts for employers; a cut in beer duty; scrapping the fuel duty rise; and raising the income tax threshold. There is even a scheme for the Government to lend 20% of the purchase price of a new home to buyers, although it remains to be seen whether this will be any more successful than previous efforts from the coalition to boost housing. These giveaways will be offset by other tax rises and further savings in departmental budgets – with health, education and overseas aid still protected from the axe.
While the measures above are certainly populist enough – Osborne has learnt his lesson about burying the bad news in the small print – they are also tiny. Over the next five years, the net impact of the Chancellor’s policy decisions on government borrowing add up to just Â£140mn – a trifling 0.1% of GDP. Correspondingly, it is no surprise at all that the Office for Budget Responsibility thinks that Osborne’s latest attempt at (what I presume he thinks is) a growth strategy will have ‘no impact on the level of GDP’. An epic fail, George.
The bottom line is not only that the Chancellor is more interested in saving his political skin than in kick-starting growth and boosting real incomes. From his insignificant tinkering – all too reminiscent of Gordon Brown – we can also reasonably deduce that he has run out of ideas. Osborne is just strapping himself into his position ever more tightly, waiting for growth to resume of its own accord. Eventually, it probably will. But in waiting for growth to materialize, rather than actively supporting recovery, George Osborne has already done significant and lasting damage to the British economy, which will only intensify while he is still at the helm. Worse, those deep scars have arisen because he is too cowardly or clueless to try something else instead. God help us all.