Budget 2016: Deficit poses a threat to Chancellor George Osborne’s ambitions

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The Chancellor Presents The Final Budget Before The 2015 General Election
Slashing spending and lifting taxes pose enormous political risks to Osborne (Source: Getty)

"Education, education, education,” preached former Prime Minister Tony Blair, nearly two decades ago. The same sentiment, if not the same soundbite, will be borrowed today by a man who very much hopes to become a future inhabitant of Number 10.

Alongside the usual fiscal tinkering, George Osborne will use the Budget to stress the importance of the government’s school reforms and is also likely to veer on to topics such as the impending referendum on EU membership. The chancellor has always enjoyed the limelight provided by a near-constant string of Budget announcements, and now has the opportunity to present himself as more than just a number-cruncher.

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He will be careful to maintain a serious and even austere demeanour. During a recent visit to China the chancellor fired a warning shot at leadership rival Boris Johnson, saying that the referendum “is not some political parlour game”. His thinking is clear – while Boris’ bombastic blustering may win him more laughs on social media (and at Tory party conferences), ultimately the party, and the general public, want a candidate they can trust.

But can Osborne be trusted? Having failed to eliminate the deficit during his first term in power, the chancellor is again struggling to reduce the huge amount of cash that the government borrows. Expect some grim reading when the OBR provides its latest update.

Osborne knows, however, that a failure to get back into the black will not necessarily mean failure in his bid to succeed David Cameron and win the next election. People do not check the latest deficit-to-GDP ratio before casting their votes.

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But many of them like to see progress. Since becoming chancellor, Osborne has convinced market participants that the public finances are heading in the right direction, thus helping to keep down borrowing costs. He needs to maintain the same trick with the electorate.

Slashing spending and lifting taxes pose enormous political risks to Osborne, but so does the possibility of a rising or even obdurately high annual deficit. It is a tricky balancing act, and one that he must master if he’s to stand a chance of moving beyond Budget speeches and grabbing the top job.

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