Osborne’s Budget provides few reasons to be cheerful

Growth revised down. Unemployment, borrowing and inflation revised up.

Unless you're Jeremy Clarkson, it's hard to see the bright spot in today's Budget. The Office for Budget Responsibility now predicts lower growth, higher inflation, higher unemployment and a slower pace of deficit reduction than it did in June. Every significant economic indicator is going in the wrong direction.

Growth for 2011 has been revised down from 2.1 per cent to 1.7 per cent and growth for 2012 has been downgraded from 2.6 per cent to 2.5 per cent. Public-sector borrowing is now forecast to be £44.5bn higher across this parliament. And, as Will Straw points out, the OBR now predicts that unemployment will be higher than expected every year from now, starting with an increase of 40,000 in 2011 and another rise of 130,000 in 2012.

As expected, George Osborne announced that the personal allowance will be raised from £7,475 to more than £8,105 in April 2012. But this tax cut (worth £120 to all those earning less than £115,000) will be swallowed up by the coalition's "permanent" VAT rise, which will cost the average adult £310, and by the 1 per cent rise in National Insurance.

With an eye to the next quarterly growth figures, it's worth noting that the OBR is now predicting growth of 0.8 per cent for Q1 of this year. The forecasters were badly wrong last time, of course, but it looks like Osborne will avoid a double dip. Yet a recovery that was already set to be slower than those of the 1970s, 1980s and 1990s will now be weaker still. The coalition's premature fiscal retrenchment has condemned Britain to years of anaemic growth.

George Eaton is political editor of the New Statesman.

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The DUP scored £1bn for just ten votes – so why be optimistic about our EU deal?

By March 2019, we’re supposed to have renegotiated 40 years of laws and treaties with 27 ­countries.

If Theresa May’s government negotiates with the European Union as well as it negotiated with the Democratic Unionist Party, it’s time to cross your fingers and desperately hope you have a secret ­Italian grandfather. After all, you’ll be wanting another passport when all this is over.

The Northern Irish party has played an absolute blinder, securing not only £1bn in extra funding for the region, but ensuring that the cash is handed over even if the power-sharing agreement or its Westminster confidence-and-supply arrangement fails.

At one point during the negotiations, the DUP turned their phones off for 36 hours. (Who in Westminster knew it was physically possible for a human being to do this?) Soon after, needling briefings emerged in the media that they were also talking to Labour and the Lib Dems. In the end, they’ve secured a deal where they support the government and get the Short money available only to opposition parties. I’m surprised Arlene Foster didn’t ask for a few of the nicer chairs in Downing Street on her way out.

How did this happen? When I talked to Sam McBride of the Belfast News Letter for a BBC radio programme days before the pact was announced, he pointed out that the DUP are far more used to this kind of rough and tumble than the Conservatives. Northern Irish politics is defined by deal-making, and the DUP need no reminder of what can happen to minnows in a multiparty system if they don’t convince their voters of their effectiveness.

On 8 June, the DUP and Sinn Fein squeezed out Northern Ireland’s smaller parties, such as the SDLP and the Alliance, from the region’s Westminster seats. (McBride also speculated on the possibility of trouble ahead for Sinn Fein, which ran its campaign on the premise that “abstentionism works”. What happens if an unpopular Commons vote passes that could have been defeated by its seven MPs?)

The DUP’s involvement in passing government bills, and the price the party has extracted for doing so, are truly transformative to British politics – not least for the public discussion about austerity. That turns out to be, as we suspected all along, a political rather than an economic choice. As such, it becomes much harder to defend.

Even worse for the government, southern Europe is no longer a basket case it can point to when it wants to scare us away from borrowing more. The structural problems of the eurozone haven’t gone away, but they have receded to the point where domestic voters won’t see them as a cautionary tale.

It is notable that the Conservatives barely bothered to defend their economic record during the election campaign, preferring to focus on Jeremy Corbyn’s spending plans. In doing so, they forgot that many of those who voted Leave last year – and who were confidently expected to “come home” to the Conservatives – did so because they wanted £350m a week for the NHS. The Tories dropped the Cameron-era argument of a “long-term economic plan” that necessitated short-term sacrifices. They assumed that austerity was the New Normal.

However, the £1bn the government has just found down the back of the sofa debunks that, and makes Conservative spending decisions for the rest of the parliament fraught. With such a slim majority, even a small backbench rebellion – certainly no bigger than the one that was brewing over tax-credit cuts until George Osborne relen­ted – could derail the Budget.

One of the worst points of Theresa May’s election campaign was on the BBC ­Question Time special, when she struggled to tell a nurse why her pay had risen so little since 2009. “There isn’t a magic money tree that we can shake that suddenly provides for everything that people want,” the Prime Minister admonished. Except, of course, there is a magic money tree, and May has just given it a damn good shake and scrumped all the cash-apples that fell from it.

That short-term gain will store up long-term pain, if the opposition parties are canny enough to exploit it. In the 2015 election, the claim that the SNP would demand bungs from Ed Miliband to prop up his government was a powerful argument to voters in England and Wales that they should vote Conservative. Why should their hospitals and schools be left to moulder while the streets of Paisley were paved in gold?

The attack also worked because it was a proxy for concerns about Miliband’s weakness as a leader. Well, it’s hard to think of a prime minister in a weaker position than May is right now. The next election campaign will make brutal use of this.

Northern Ireland might deserve a greater wodge of redistribution than the Barnett formula already delivers – it has lower life expectancy, wages and productivity than the British average – but the squalid way the money has been delivered will haunt the Tories. It also endangers one of the Conservatives’ crucial offers to their base: that they are the custodians of “sound money” and “living within our means”.

Labour, however, has not yet quite calibrated its response to the DUP’s new-found influence. Its early attacks focused on the party’s social conservatism, pointing out that it is resolutely anti-abortion and has repeatedly blocked the extension of equal marriage through “petitions of concern” at Stormont.

This tub-thumping might have fired up Labour’s socially progressive supporters in the rest of the UK, but it alienated some in Northern Ireland who resent their politicians being seen as fundamentalist yokels. (Only they get to call the DUP that: not Londoners who, until three weeks ago, thought Arlene Foster was the judge who got sacked from Strictly Come Dancing.)

And remember: all this was to get just ten MPs onside. By March 2019, we’re supposed to have renegotiated 40 years of legislation and treaties with 27 other European ­countries. Ha. Hahaha. Hahaha.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

This article first appeared in the 29 June 2017 issue of the New Statesman, The Brexit plague

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