SORRY always seems to be the hardest word. That didn’t stop Alistair Darling demanding an apology from his successor yesterday. The former chancellor feels vindicated now the Office for Budget Responsibility (OBR) has produced forecasts for public borrowing which are lower than the ones he unveiled in March.
Sir Alan Budd, the OBR’s interim head, also confirmed that Darling’s plans for £44bn of spending cuts by 2014-15 (conveniently kept from the electorate) would have “eliminated the bulk of the structural deficit by 2015”. That’s bad for Osborne: he has the same target, but has argued Labour’s spending cuts wouldn’t have gone far enough.
So, case closed. Darling deserves an apology. Of course, it’s not that simple – things rarely are.
Firstly, Budd and his team at the OBR thought Darling’s growth forecasts were too optimistic. That means the structural deficit – the portion of the deficit that won’t be eradicated by growth – is larger than thought. If anything, the cuts will need to be tougher.
The OBR has also been more optimistic about certain things than Darling was when he compiled his Budget. That’s because it has taken a central, rather than a worst-case forecasting position.
Budd also used current market expectations for the cost of public borrowing and interest rates. Both have improved since the coalition took power, because markets think the new government will be more fiscally conservative. The yield on the 10-year UK gilt is down about 50 basis points since Osborne took the keys to Number 11.
So, Darling’s figures are actually being flattered – or “biased upwards” in the words of the OBR – by policy decisions that the Liberal-Conservatives have made since they came to power.
That means Darling will be waiting some time for that apology.