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| Budget 2013: Osborne edges the deficit down – but is it smoke and mirrors? | Budget 2013: Osborne edges the deficit down – but is it smoke and mirrors? |
| (about 1 month later) | |
| In the autumn statement, George Osborne pulled out all the stops to show the annual deficit was falling year on year. He included funds from the 4G mobile network auction and the interest he paid to the Bank of England for the money it lent the Treasury. It bamboozled Ed Balls, his Labour shadow, who went into the debate convinced that a double-dip recession and flat growth had surely pushed up the deficit. | In the autumn statement, George Osborne pulled out all the stops to show the annual deficit was falling year on year. He included funds from the 4G mobile network auction and the interest he paid to the Bank of England for the money it lent the Treasury. It bamboozled Ed Balls, his Labour shadow, who went into the debate convinced that a double-dip recession and flat growth had surely pushed up the deficit. |
| Many expected Osborne to repeat the trick in his budget statement, but he came with a clear conscience and a transparent set of figures. | Many expected Osborne to repeat the trick in his budget statement, but he came with a clear conscience and a transparent set of figures. |
| He told the Commons he would eschew the jiggery-pokery that allowed him to cut the deficit from £121bn to nearer £80bn. Instead, he excluded all the exceptional items. Without actually spelling it out, he admitted that, under the Office for Budget Responsibility's (OBR) forecasts, the deficit would rise to £123bn. | He told the Commons he would eschew the jiggery-pokery that allowed him to cut the deficit from £121bn to nearer £80bn. Instead, he excluded all the exceptional items. Without actually spelling it out, he admitted that, under the Office for Budget Responsibility's (OBR) forecasts, the deficit would rise to £123bn. |
| He avoided telling MPs in the chamber. Ed Miliband was poised to highlight any such admissions of missed targets. Instead Osborne let the figure sit among thousands of others in the OBR documents. | He avoided telling MPs in the chamber. Ed Miliband was poised to highlight any such admissions of missed targets. Instead Osborne let the figure sit among thousands of others in the OBR documents. |
| It is a blow to the chancellor, though not as much of a blow as a rising deficit in the year before an election. That was the prospect he faced if he adopted the lower figure because that is scheduled to rise in 2014. It is not clear why it rises, but it would be electoral dynamite for the austerity chancellor to fight the election with his trump card shredded. | It is a blow to the chancellor, though not as much of a blow as a rising deficit in the year before an election. That was the prospect he faced if he adopted the lower figure because that is scheduled to rise in 2014. It is not clear why it rises, but it would be electoral dynamite for the austerity chancellor to fight the election with his trump card shredded. |
| Also, for the experts who read the Treasury's own documents, he was able to show that "underlying" public sector net borrowing inched down £100m this year. It may not seem much against a £121bn total, but a promise is a promise, and he said the deficit would fall each and every year. | Also, for the experts who read the Treasury's own documents, he was able to show that "underlying" public sector net borrowing inched down £100m this year. It may not seem much against a £121bn total, but a promise is a promise, and he said the deficit would fall each and every year. |
| Next year, it will edge down by a further £900m to £120bn, allowing Osborne to say that underlying borrowing is falling this year and next. | Next year, it will edge down by a further £900m to £120bn, allowing Osborne to say that underlying borrowing is falling this year and next. |
| The underlying figure should be more transparent than the OBR's headline numbers, but Ian Mulheirn, director of the Social Market Foundation, said it is all smoke and mirrors: "This looks very much like the results of some creative accounting. Next year, the deficit will only fall because of new departmental spending cuts that were spun as a switch to fund growth-boosting infrastructure. | The underlying figure should be more transparent than the OBR's headline numbers, but Ian Mulheirn, director of the Social Market Foundation, said it is all smoke and mirrors: "This looks very much like the results of some creative accounting. Next year, the deficit will only fall because of new departmental spending cuts that were spun as a switch to fund growth-boosting infrastructure. |
| "With the savings arriving next year but the investment outlay delayed to the year after, the move means that borrowing in 2013/14 might just fall." | "With the savings arriving next year but the investment outlay delayed to the year after, the move means that borrowing in 2013/14 might just fall." |
| Looking at this year, Mulheirn points out that £1.6bn of spending has been pushed into next year partly by refusing to pay the bills for membership of some international institutions. | Looking at this year, Mulheirn points out that £1.6bn of spending has been pushed into next year partly by refusing to pay the bills for membership of some international institutions. |
| "That won't do much to convince people that the Treasury is being straight with us about the deficit. But it will rob the opposition of a devastating attack line," he said. | "That won't do much to convince people that the Treasury is being straight with us about the deficit. But it will rob the opposition of a devastating attack line," he said. |
| Balls will prefer to focus on some of the numbers underneath the headlines. Where will the chancellor find extra savings in the comprehensive spending review? | Balls will prefer to focus on some of the numbers underneath the headlines. Where will the chancellor find extra savings in the comprehensive spending review? |
| Osborne wants £11.5bn in Whitehall cuts, not the £10bn he demanded in the autumn statement. Will he target the ballooning pensions budget, as Balls suspects? | Osborne wants £11.5bn in Whitehall cuts, not the £10bn he demanded in the autumn statement. Will he target the ballooning pensions budget, as Balls suspects? |
| More troublesome for Balls is the proposed lock on public sector pay, which is capped at 1% for another year alongside a clampdown on merit pay. With public sector pensions under attack as well, it could push the unions to more and bigger strikes. Keeping the spotlight on the government will become more difficult. | More troublesome for Balls is the proposed lock on public sector pay, which is capped at 1% for another year alongside a clampdown on merit pay. With public sector pensions under attack as well, it could push the unions to more and bigger strikes. Keeping the spotlight on the government will become more difficult. |
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