Despite the newly formed Office for Budget Responsibility (OBR) not finding any large skeletons rattling around in the Treasury closets, there is still a huge mountain to climb.
The OBR “was formed in May 2010 to make an independent assessment of the public finances and the economy for each Budget and Pre-Budget Report”. What it will do is provide an assessment of “whether the Government's policy is consistent with a better than 50 per cent chance of achieving the forward looking fiscal mandate set by the Chancellor”.
The OBR’s first report showed that the position is not as dire as previously thought and sterling rose against the dollar and euro on the news.
However, UK growth for 2011 has been downgraded from Alistair Darling’s 3.25% to 2.6% and from 3.5% in 2012 to 2.8%. but the good news is that the overall government borrowing figure for the next five years is expected to be Â£23 billion less than previously forecast. But the government will still have to find about Â£85 billion to balance the nation’s accounts by the end of this parliament in five years time.
Some will see this as a vindication of Alistair Darling’s overall assessment of the economy prior to being ejected from office by the general election. In fact the ex-Chancellor demanded an apology from the new incumbents for saying that Labour had left the economy in a worse state than initially thought. This with the Â£23 billion less borrowing required may actually it harder for the government to convince voters that austerity is the way forward in the run up to the emergency budget. Especially when even the LibDem leader and Deputy PM, Nick Clegg, is talking about the public sector final salary pension schemes in the same breath as the words ‘unfair’ and ‘unsustainable’.