Osborne set to miss deficit targets

Sluggish growth means that total borrowing will still be 3.6 per cent in 2015-16.

Whatever voting system the next election is fought under, the result is likely to be determined by the state of the economy. With this in mind, the latest forecasts don't give George Osborne much cause for optimism. The April review from the National Institute for Economic and Social Research (NIESR) suggests that growth will be significantly lower than expected and that, as a result, Osborne will miss his target to balance the structural deficit by 2015-16 (the OBR expects a surplus of 0.8 per cent). The NIESR predicts that total borrowing will be 3.6 per cent of GDP in 2015-16, well above the OBR forecast of 1.5 per cent.

It notes:

"The weak recovery will feed through to lower tax revenues. That will mean that even if the spending plans are met over the next four years, public sector net borrowing will fall only to 3.6 per cent of GDP in 2015-16 rather than the 1.5 per cent projected by the Office for Budget Responsibility. Likewise, the current budget will then run a deficit of 2.2 per cent of GDP compared with the OBR's surplus of 0.2 per cent. We do not expect the government to meet its target to balance the cyclically-adjusted current budget by 2015-16."

As Osborne's critics have persistently warned, anaemic growth means a slower pace of deficit reduction. At the Budget, the OBR downgraded its growth forecast for 2011 to 1.7 per cent (down from 2.1 per cent in November, 2.3 per cent following the Emergency Budget and 2.6 per cent in June), but the NIESR is predicting growth of just 1.4 per cent for this year. Given that the economy grew by just 0.5 per cent in the first quarter of this year, significantly below the official forecast of 0.8 per cent, the smart money is on the OBR having to downgrade its growth forecast for the fourth time.

The political upshot of all this is that Osborne will have less room to fund a pre-election giveaway in 2015. The Chancellor pushed hard for a five-year term during the coalition negotiations in the belief that this would leave the economy with enough time to recover from his austerity measures. But it looks like his gamble may not pay off.

George Eaton is political editor of the New Statesman.

Grant Shapps on the campaign trail. Photo: Getty
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Grant Shapps resigns over Tory youth wing bullying scandal

The minister, formerly party chairman, has resigned over allegations of bullying and blackmail made against a Tory activist. 

Grant Shapps, who was a key figure in the Tory general election campaign, has resigned following allegations about a bullying scandal among Conservative activists.

Shapps was formerly party chairman, but was demoted to international development minister after May. His formal statement is expected shortly.

The resignation follows lurid claims about bullying and blackmail among Tory activists. One, Mark Clarke, has been accused of putting pressure on a fellow activist who complained about his behaviour to withdraw the allegation. The complainant, Elliot Johnson, later killed himself.

The junior Treasury minister Robert Halfon also revealed that he had an affair with a young activist after being warned that Clarke planned to blackmail him over the relationship. Former Tory chair Sayeedi Warsi says that she was targeted by Clarke on Twitter, where he tried to portray her as an anti-semite. 

Shapps appointed Mark Clarke to run RoadTrip 2015, where young Tory activists toured key marginals on a bus before the general election. 

Today, the Guardian published an emotional interview with the parents of 21-year-old Elliot Johnson, the activist who killed himself, in which they called for Shapps to consider his position. Ray Johnson also spoke to BBC's Newsnight:


The Johnson family claimed that Shapps and co-chair Andrew Feldman had failed to act on complaints made against Clarke. Feldman says he did not hear of the bullying claims until August. 

Asked about the case at a conference in Malta, David Cameron pointedly refused to offer Shapps his full backing, saying a statement would be released. “I think it is important that on the tragic case that took place that the coroner’s inquiry is allowed to proceed properly," he added. “I feel deeply for his parents, It is an appalling loss to suffer and that is why it is so important there is a proper coroner’s inquiry. In terms of what the Conservative party should do, there should be and there is a proper inquiry that asks all the questions as people come forward. That will take place. It is a tragic loss of a talented young life and it is not something any parent should go through and I feel for them deeply.” 

Mark Clarke denies any wrongdoing.

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.