So we now have the definitive answer from the Office of Budget Responsibility – George Osborne’s version of making the Bank of England independent. Growth will be lower than forecast in the budget. So naturally that means that Alistair Darling was brow beating those timid civil servants in the Treasury. Yeah, right! Its exactly what people such as Danny Blanchflower have been predicting for ages. If you cut Government spending, you will cut growth, because at the moment the private sector can’t or won’t spend, so the only thing keeping the British economy on its feet is the bad old ineficient public sector.
But what about that “terrible legacy” that Labour left? You know, the one that was “worse then we had been led to believe” and “showed massive amounts of irresponsible spending”? Well, it turns out things arn’t as bad as even the Treasury thought they were as recently as March. In the budget, Alistair Darling predicted that the deficit for 2009-10 would be £167 billion – and that was down from the figure in the pre-budget report in November of £176 billion. Well, 09-10 turned out at £157bn – or 11.5% of GDP.
And what of the predictions? Well, theres actually very little difference between what is now the “true state of the nations finances” and the “work of fiction” produced by the Treasury. Sir Alan Budd now predicts, that after cutting, not waste, but programmes to help the young unemployed, the deficit will still be 3.9% of GDP in 2014/15 – as against 4.0% as predicted in the March budget. Thats not very much, and could easily be lost in the margin of error. Why is the figure still so high? Maybe its because Sir Alan realises that GDP will be lower in 2014/15, so the actual amount of the deficit will be much lower, even if the percentage isnt. So it comes down to the age old question – Cuts or Growth? – you can’t have both.