IT WOULD be curious if there was any change of economic direction by George Osborne in his Budget this week. It is being dubbed an “emergency” Budget in some excitable quarters, but it is so only in that it is happening quickly in the new parliament.
There is certainly tangible less emergency about it than the one unveiled by the Chancellor as part of the new Conservative/Liberal Democrat coalition in 2010. Then, the political tectonic plates had changed, and New Labour/old Labour/any old Labour was out on its ear in the continuing fall-out from Tony Blair taking us cavalierly along with the “coalition of the unthinking” into the Iraq war and public fatigue on the party’s penchant for personal infighting at the top of the greasy pole.
In many ways, Osborne could get away with a more-of‑the‑same Budget on Wednesday, as we are only halfway through the austerity programme. The public finances have started off the current 2015/16 year pretty decently, with no major bumps in the road. As Howard Archer, economist at IHS Global Insight, says: “With the general election safely out of the way and the economy seemingly doing okay at the moment, there is no pressing need for the Chancellor to go for any sweeteners in the Budget.”
Osborne is likely to press ahead with his plans for substantial cuts to welfare benefits and department spending. But that is so expected by financial markets and wider society that it would hardly constitute any sense of shock, and certainly not awe.
There is another reason for a front-end‑loaded continuing austerity drive: to get the pain out the way in the first few years of the new parliament so that the memories will hopefully be fading in the run-up to the next general election in 2020.
Meanwhile, macro political and economic factors, most notably the seemingly endless brinkmanship about Greek membership of the euro, and the somewhat less fraught issue of Britain’s relationship with the wider European Union, cannot be affected by budgetary measures. They are significant strategic concerns offstage, but cannot be addressed by short-term initiatives or tactics.
Even so, Budgets can always throw up the unexpected. Osborne may want to make some sort of palpable declaration of intent, going beyond a mere change of political tone, to recognise that the Tories now have an overall majority, even if wafer-thin.
The government having the Lib-Dems off their backs is the wild card of this week’s event. Will Osborne do something on the 40 and 45 per cent top rates of tax? Are the banks due for more flagellation?
Conventional wisdom has become that they normally are since the financial crisis triggered the recession.
My instinct is that most of what Osborne has to say will not flutter the City dovecotes, but that there will be something for his back benches to symbolise the Conservatives’ new freedom to flex. «