Budget day is full of tradition. Details will leak in the days leading up to it, the chancellor will pose with his red box, Sky News will launch a helicopter to film his short drive from the Treasury to Parliament and the devil will always be found in the detail.
There’s another Budget tradition that has, regrettably, fallen by the wayside. Chancellors used to be able to enjoy a tipple at the despatch box, but nobody’s done that since Ken Clarke.
If Osborne had decided to revive the practice yesterday, he’d have been better off with a stiff scotch over a glass of champagne – for there’s not much to celebrate, as the Office for Budget Responsibility has made clear.
Forecasts for growth and productivity have been revised down and the public finances are far from rosy. When it comes to the central task of deficit elimination (now likely to be a three-parliament task), the Centre for Economics and Business Research notes that “the chancellor’s figures still don’t add up”, while economists warn that balanced books remain a long way off.
Simon Ward, chief economist at Henderson Global Investors, didn’t pull his punches when he warned that Osborne’s forecast numbers “rely on accounting tricks, unspecified future spending reductions and more stealth taxes”.
Elements of the Budget are, however, to be welcomed – such as the cuts to corporation tax and capital gains tax – but they won’t save Osborne from fiscal reality. Under the plans announced yesterday, the state will be spending 36.9 per cent of GDP in 2020, more than the 35.4 per cent predicted by Osborne in his Autumn Statement in November last year. Debt as a proportion of GDP also remains stubbornly high.
Given the cocktail of threats currently sloshing around the global economy, Osborne has very little wriggle room. As things stand, he’s committed to a staggering £31bn of cuts in the final year of this parliament. Even assuming this comes to pass, it would only take an uptick in borrowing costs or further cuts to growth projections to make additional tax rises inevitable.
Osborne has already broken two of his three rules: to cap welfare spending and lower the ratio of debt to GDP. His chances of sticking to the third rule, to achieve a surplus by 2020, now hang by a thread.