Budget will be full of sound and fury – signifying nothing

Share this article
0
Have your say

Love them or hate them, they just won’t go away. Another Budget looms and already the jungle drums are rumbling.

Part of my erstwhile day job entailed trotting out quick res­ponse analysis of UK Budgets, a task that became harder and harder as Chancellors became ever more mired in terminological inexactitudes.

There was a time when they said what they meant. Geoffrey Howe never won any prizes for excitement, but as soon as he had sat down you knew where you were. I liked that – and I loathed it when year after year Gordon Brown took such pride in putting us all off the scent, machine-gunning us with phony numbers plucked from nowhere, designed solely for the fleeting gratification of those
sitting behind him.

When the poisoned chalice passed to Alistair Darling things did improve. As ever, the numbers were flaky but at least you could feel that someone, somewhere was trying to be honest. Even he, though, could not resist the odd silly gimmick. The 50 per cent income tax band was a perfect illustration of how good politics is often bad economics.

And now we have George Osborne, a Chancellor who in his first Budget declared that there would be no more smoke and mirrors, he would tell it as it is. And, to a mildly surprising degree, he did. Yet he, too, seems beguiled by the attractions of politicking and being too clever. No surprise, then, that people focus on looking for the next opportunity for him to come unstuck - the next “pasty tax”, say – rather than where they might be more usefully engaged – on the bigger picture, the strategy and its delivery. Nobody likes a Chancellor bringing bad news; even fewer like a Smart Alec.

But when Moody’s, the ratings agency, kicked the UK’s rating down from the “Triple A” of which Osborne had (unwisely) boasted to a less impressive Aa1 – the same as France, for goodness’ sake - the bigger picture came right back on stage.

Ahead of this 2013 budget the commentariat is already humming away: does the downgrade condemn the strategy as a failure, should we bring in relief supplies of hooch to try to get the party roaring again, should the Budget bring some kind of admission that change is needed or even any change at all? As ever, appearances and reality may not be the same.

There’s no doubt that things are not going exactly according to plan. Growth has been disappointing, indeed, GDP is barely changed. Amidst all the wailing and gnashing of teeth it is not particularly evident that public sector spending (overall) has fallen. Osborne has already acknowledged that the task is behind schedule, that we shall be officially austere until 2018. From the other side of the pond there’s the alluring sight of another economy, also downgraded, which seems to be doing so much better. And there’s something of a paradox: the UK is downgraded for being too hard on itself while the US had not been harsh enough. At least, point out the sceptics, US recovery seems to have clear traction.

So the pressure is on and there are hard questions to answer. Economists, including those at the Treasury, have a good understanding of the impacts of retrenchment on the wider economy during times of “normal” recession.

Sadly, these times are not normal, and we now know that the impacts have been greater than expected. But the impression that retrenchment has ploughed on unabated is false; quietly government has been more relaxed, permitting classically orthodox expenditure on infrastructure for example. “Plan A” has indeed needed adapting but, without fanfare, it has been.

Take that together with other indicators that the economy is not in quite the poor state that it looks, notably the strength of the labour markets, and you can start to feel that the strategy may not be broken after all.

Budget day will be the usual rumbustious affair, but when it’s done my bet is that nothing much will have changed. Which is good, because the reality is that “Plan A” is about as least-bad as it gets.

• Peter Bickley is a consultant economist