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.

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Commons Confidential: Fearing the Wigan warrior

An electoral clash, select committee elections as speed dating, and Ed Miliband’s political convalescence.

Members of Labour’s disconsolate majority, sitting in tight knots in the tearoom as the MP with the best maths skills calculates who will survive and who will die, based on the latest bad poll, observe that Jeremy Corbyn has never been so loyal to the party leadership. The past 13 months, one told me, have been the Islington rebel’s longest spell without voting against Labour. The MP was contradicted by a colleague who argued that, in voting against Trident renewal, Corbyn had defied party policy. There is Labour chatter that an early general election would be a mercy killing if it put the party out of its misery and removed Corbyn next year. In 2020, it is judged, defeat will be inevitable.

The next London mayoral contest is scheduled for the same date as a 2020 election: 7 May. Sadiq Khan’s people whisper that when they mentioned the clash to ministers, they were assured it won’t happen. They are uncertain whether this indicates that the mayoral contest will be moved, or that there will be an early general election. Intriguing.

An unguarded retort from the peer Jim O’Neill seems to confirm that a dispute over the so-called Northern Powerhouse triggered his walkout from the Treasury last month. O’Neill, a fanboy of George Osborne and a former Goldman Sachs chief economist, gave no reason when he quit Theresa May’s government and resigned the Tory whip in the Lords. He joined the dots publicly when the Resolution Foundation’s director, Torsten Bell, queried the northern project. “Are you related to the PM?” shot back the Mancunian O’Neill. It’s the way he tells ’em.

Talk has quietened in Westminster Labour ranks of a formal challenge to Corbyn since this year’s attempt backfired, but the Tories fear Lisa Nandy, should the leader fall under a solar-powered ecotruck selling recycled organic knitwear.

The Wigan warrior is enjoying favourable reviews for her forensic examination of the troubled inquiry into historic child sex abuse. After Nandy put May on the spot, the Tory three-piece suit Alec Shelbrooke was overheard muttering: “I hope she never runs for leader.” Anna Soubry and Nicky Morgan, the Thelma and Louise of Tory opposition to Mayhem, were observed nodding in agreement.

Select committee elections are like speed dating. “Who are you?” inquired Labour’s Kevan Jones (Granite Central)of a stranger seeking his vote. She explained that she was Victoria Borwick, the Tory MP for Kensington, but that didn’t help. “This is the first time you’ve spoken to me,” Jones continued, “so the answer’s no.” The aloof Borwick lost, by the way.

Ed Miliband is joining Labour’s relaunched Tribune Group of MPs to continue his political convalescence. Next stop: the shadow cabinet?

Kevin Maguire is Associate Editor (Politics) on the Daily Mirror and author of our Commons Confidential column on the high politics and low life in Westminster. An award-winning journalist, he is in frequent demand on television and radio and co-authored a book on great parliamentary scandals. He was formerly Chief Reporter on the Guardian and Labour Correspondent on the Daily Telegraph.

This article first appeared in the 27 October 2016 issue of the New Statesman, American Rage