It’s becoming a bit of a tradition this. One day, the government proclaims the brilliance of its budget, talks up the economic forecasts and claims that ‘the plan is working’. Then the next day, the Institute for Fiscal studies pours cold water on the whole thing.
Yes, the OBR’s forecasts for economic growth are slightly higher than those of last year, which means that unemployment and therefore benefits spending will probably be lower than they thought. That eases the pressure on government finances so much that cumulative cuts to public service spending can be reduced from 20.4 percent to…er… 19.8 percent. In other words, as Gemma Tetlow said, “the picture is largely unchanged”.
As she also points out, by the time we’ve protected health, education and overseas aid from cuts, that translates into cumulative cuts, by 2018-19, of over 35 percent for everything else. And more than half of those cuts are due in the next parliament.
That’s not all though. She reckons the chancellor’s recent giveaways have made the public finances riskier:
Permanent tax giveaways have been “paid for” by temporary revenue raisers and unspecified spending cuts.
And as her boss, Paul Johnson, said we still don’t know how George is going to do all this:
It is…a Budget which leaves us with as little sense as we had before of quite how the very large public spending cuts still in the pipeline will actually be delivered.
The problem is that, while growth looks like it is going to be better than the OBR forecast last year, it is still desperately low by the standards of previous post recession recoveries.
Source: BBC News
Furthermore, the forecasts for later in the decade have been revised downwards. In other words, this is the growth we were going to get anyway, only we are getting it a little sooner than we thought.
None of this is likely to be enough to make much of a difference to the public finances. So the 2015 dilemma is still there, waiting for the next prime minister and chancellor.
But, for now, there is an election to win, so, after quietly easing up on the cuts, it’s time to give a few things away to make people happy. Let’s worry about how to pay for them some other time. The 2015 dilemma, well, that’s for 2015, isn’t it?