One stood out for me above the rest. The Office for Budget Responsibility now says that growth this year will be -0.1%. That’s down from their forecasts of 2.8% in June 2010 and 0.8% in March this year. I’ve heard of margins of error, but really now, this is getting silly.
And what was announced today to address this? Not a lot that I could see. Lord Heseltine’s ‘No Stone Unturned’ report on growth contained 89 recommendations for Government. Heseltine’s review – which the Chancellor himself commissioned – got a cursory mention, warm words on some of the least consequential proposals and a pledge to respond formally in the Spring. This sounds suspiciously like a good hard kick into the long grass.
Ed Balls’ response focused heavily on the fact that projections on borrowing, debt and deficit are all going up, not down, and that the Chancellor will miss his target to have debt falling as a share of GDP by the end of this Parliament. Of course it’s right to highlight this failure. But there are two sides to this: it is a failure not just to reduce borrowing, but also to grow GDP.
To be fair Balls did mention this and reiterated a number of Labour proposals to boost growth: using the sale of the 4G spectrum to build more houses; a national insurance holiday for small businesses; and a repeat of the bank bonus tax to invest in jobs for young people.
But a focus on growth must be front and centre of all Labour comment on the economy. It is right and proper to point out that the Government is missing its target of eliminating the deficit in this Parliament. But the fact is, we wouldn’t have eliminated it in this Parliament either, and never promised otherwise. The message on growth is where the real difference and the real opportunity lies for Labour.
There were other aspects of the Statement which didn’t add up. Boasting of a string of tough new measures on tax avoidance, shortly before justifying a cut in the top rate of tax on the basis that people were avoiding it, was a prime example of this. Surely, George, it would make more sense to clamp down on tax avoidance then see how much the 50p rate raised, no?
There’s no doubt that some of this Statement will go down well in much of the media. The Mail will love the Welfare Uprating Bill, enshrining below inflation rises in benefit payments. The Sun will claim victory on the fuel duty cut. And many will cheer the resolute message that there will be no change in course on deficit reduction.
However, there seemed little in here to change the terms of the debate. Little that will restore Osborne’s reputation as a master strategist following his disastrous Budget in March. Little to ease the burden of those suffering most from cuts to public services and a squeeze in living standards. And precious little that leads me to believe that this set of growth forecasts will be any more accurate than the last.
We now know for sure that the deficit will be a fact of life well into the next Parliament. Therefore it will be the key battleground on which the next election is fought.
Labour will never win that election on a bidding war on who can cut the most.
Instead the two Eds must fight on a platform of growth, growth, growth.
Simon Fitzpatrick works on financial policy at Cicero Consulting.