The Chancellor is just clinging on until the referendumby Vicky Pryce / March 17, 2016 / Leave a comment
George Osborne: our very own Wilkins Micawber
This was undoubtedly a pre-referendum Budget. Osborne’s speech was aimed at convincing people he was still in control of the country’s economy, despite the worrying slowdown in growth across the world. It was aimed at convincing them that any growth the UK enjoys is down to his statesmanship and skilful policy-making, and that it could all be put at risk if Britain voted to leave the EU.
In the run-up to the Budget, the Chancellor had warned us that a fiscal re-think was needed in light of the struggling world economy. A number of monetary authorities, including the Bank of Japan and the European Central Bank, had moved to negative interest rates amid worries about deflation and a possible recession. The Office for Budget Responsibility’s (OBR) optimism of last autumn (communicated by Osborne in his Autumn Statement) could no longer hold. So the growth forecasts accompanying the Budget was duly scaled down, and by more than most people expected. The forecasts for this year were downgraded from 2.4 per cent to just 2 per cent, up again to 2.2 per cent next year, before settling down to 2.1 per cent until the next Parliament in 2020.
This forecast came closer to a number of private sector forecasts (for example, the one by the British Chambers of Commerce), which have recently been revised. But the growth profile presented by the Chancellor is still below recent forecasts by the Confederation of British Industry, the British Chambers of Commerce. And also the IMF, which was still expecting the UK to grow by 2.2 per cent at the time of its February report on Britain’s economy.
Politically, one suspects Osborne had to be doubly pessimistic. So he warned about the global economic dangers ahead, but also emphasised that the latest growth forecasts—already downbeat—were dependent on the UK staying in the EU. Osborne of course was at pains to stress that the OBR is politically independent, but then liberally quoted passages…