6 Theses on the Budget


The budget has blown apart the notion that Labour and the Conservatives are much the same. Many commentators during the election argued that the 2 parties had very similar policies on dealing with the deficit, and differences between them were exaggerated for electoral purposes. This view was strengthened during the campaign when the difference between the parties was reduced to whether or not to make £6 billion of early cuts.  Now there’s a massive difference: Labour pledged to halve the deficit in 4 years, which they projected would involve taking £82 Billion off it (which in itself seemed ambitious), the coalition has said it will eliminate the structural deficit by 2014-15, therefore going twice as fast, adding a further £40 Billion reduction.


George Osborne has, with great fanfare, created the new Office for Budget Responsibility, the OBR. Its purpose was to undertake tasks previously done by the treasury, to make forecasts for economic growth, the size of government spending and borrowing, and comment of the shape of the economy. This has been billed as a great reforming measure, taking power from politicians (bad) and giving it to trusted experts (good).  The trouble is that is doesn’t look very independent. Its chair, Sir Alan Budd, a former advisor to Norman Lamont (like David Cameron) has been working for the Conservative party for the last year. Recently, following a document leaked by the Guardian that presented a damning set of statistics on job losses, the OBR rushed out its own document, rather more favourable to the government, in time for David Cameron to quote from it at Question Time. For the OBR to have any credibility at all it need to be appointed by Parliament, not just the chancellor, and should, like the Bank of England’s Monetary Policy Committee, include a range of economists with different specialisms and differing approaches.

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