PMQs sketch: Dave's Darling

"He's on another planet," said Ed of the PM, with the look of a man who wished he could join him.

Those who have yet to buy a copy of Alistair Darling's book on his time with the Great Sulk should rush out and get one, because it is the only way to make sense of the farce that was the first Prime Minister's Questions since MPs took themselves off in July for their several holidays.

With the economy on its uppers, inflation on the increase and growth shrinking, we all knew what the hot topic of the day would be, as Ed (fresh from his nose job) set about Dave (poshly sunburnt; despite having to pop back to town for a few days because of the riots and Libya). Indeed, Ed had to be up for it following recent opinion polls showing Labour just a couple of percentage points ahead of the Tories, despite almost a year under his care.

And so Ed let Dave have it with both barrels: Why is the Government holding elections for police commissioners in November instead of next May?

Earlier, Dave had been seen in earnest last-minute conversations with Chancellor George (equally sun-tanned), being briefed on what tack to take when Ed launched his economy broadside; but this one seemed to stun him.

Indeed, the Commons fell silent for a moment as Members on all sides considered the import of this, the first question to the Prime Minister after such a tumultuous period in our national affairs.

The real reason for this question and the smile it brought to Dave's face had been spotted tucked under his arm by an eagle-eyed reporter as he entered the Chamber: a well-thumbed copy of Alistair's book.

The curse of the Ali/Alastairs is becoming a common thread in recent Labour history, and Alistair D's intervention seems to be at least as unhelpful as many of those attributed to Alastair Campbell.

In the latest Alastair missive, details of his tortuous relationship with Gordon Brown and the Stasi-like behaviour of his team, led by enforcer Ed Balls, are revealed; not unlike the revelations of the books by the other A. It should be remembered that Ed M was praised for his bravery by keeping Ed B away from the Treasury brief when he first took over as leader. But that bold plan was quickly dropped when Alan Johnson, Ed's odd choice for Shadow Chancellor, fell by the wayside.

Just to make matters worse, Darling recounts that Labour's 2009 budget was conceived in chaos and resulted in a complete mess of an economic policy; a bit of a bummer, since this is the plan the Opposition is presently sticking to.

With Ed the Enforcer sitting just a couple of seats away, it was soon obvious that Ed the Leader had decided to bottle it. After the questions on police commissioners came questions on waiting lists, and Cameron's grin only widened. "He's on another planet" said Ed, with the look of a man who wished he could join him.

This let Dave in with the one answer to the Labour Leader he hadn't expected to utter: "He doesn't dare in six questions to mention the economy". Even Nick smiled at that one.

With party conference season just around the corner, MPs back from their hols on Monday will be off again in just ten days for another three weeks of naval gazing. Dave must be delighted that despite presiding over the worst economic crisis for 60 years, he is still personally popular and his party almost up there with Labour in the polls. All he has to do is persuade the recidivists that the Lib Dems aren't getting away with blue murder. Nick has to persuade his lot they are.

Ed Miliband should have had the easiest job of all, but with the recent polls and today's performance, is the jury out again?

As Bill Clinton said: "It's the economy, stupid."

Peter McHugh is the former Director of Programmes at GMTV and Chief Executive Officer of Quiddity Productions.

Peter McHugh is the former Director of Programmes at GMTV and Chief Executive Officer of Quiddity Productions

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George Osborne's mistakes are coming back to haunt him

George Osborne's next budget may be a zombie one, warns Chris Leslie.

Spending Reviews are supposed to set a strategic, stable course for at least a three year period. But just three months since the Chancellor claimed he no longer needed to cut as far or as fast this Parliament, his over-optimistic reliance on bullish forecasts looks misplaced.

There is a real risk that the Budget on March 16 will be a ‘zombie’ Budget, with the spectre of cuts everyone thought had been avoided rearing their ugly head again, unwelcome for both the public and for the Chancellor’s own ambitions.

In November George Osborne relied heavily on a surprise £27billion windfall from statistical reclassifications and forecasting optimism to bury expected police cuts and politically disastrous cuts to tax credits. We were assured these issues had been laid to rest.

But the Chancellor’s swagger may have been premature. Those higher income tax receipts he was banking on? It turns out wage growth may not be so buoyant, according to last week’s Bank of England Inflation Report. The Institute for Fiscal Studies suggest the outlook for earnings growth will be revised down taking £5billion from revenues.

Improved capital gains tax receipts? Falling equity markets and sluggish housing sales may depress CGT and stamp duties. And the oil price shock could hit revenues from North Sea production.

Back in November, the OBR revised up revenues by an astonishing £50billion+ over this Parliament. This now looks a little over-optimistic.

But never let it be said that George Osborne misses an opportunity to scramble out of political danger. He immediately cashed in those higher projected receipts, but in doing so he’s landed himself with very little wriggle room for the forthcoming Budget.

Borrowing is just not falling as fast as forecast. The £78billion deficit should have been cut by £20billion by now but it’s down by just £11billion. So what? Well this is a Chancellor who has given a cast iron guarantee to deliver a surplus by 2019-20. So he cannot afford to turn a blind eye.

All this points towards a Chancellor forced to revisit cuts he thought he wouldn’t need to make. A zombie Budget where unpopular reductions to public services are still very much alive, even though they were supposed to be history. More aggressive cuts, stealthy tax rises, pension changes designed to benefit the Treasury more than the public – all of these are on the cards. 

Is this the Chancellor’s misfortune or was he chancing his luck? As the IFS pointed out at the time, there was only really a 50/50 chance these revenue windfalls were built on solid ground. With growth and productivity still lagging, gloomier market expectations, exports sluggish and both construction and manufacturing barely contributing to additional expansion, it looks as though the Chancellor was just too optimistic, or perhaps too desperate for a short-term political solution. It wouldn’t be the first time that George Osborne has prioritised his own political interests.

There’s no short cut here. Productivity-enhancing public services and infrastructure could and should have been front and centre in that Spending Review. Rebalancing the economy should also have been a feature of new policy in that Autumn Statement, but instead the Chancellor banked on forecast revisions and growth too reliant on the service sector alone. Infrastructure decisions are delayed for short-term politicking. Uncertainty about our EU membership holds back business investment. And while we ought to have a consensus about eradicating the deficit, the excessive rigidity of the Chancellor’s fiscal charter bears down on much-needed capital investment.

So for those who thought that extreme cuts to services, a harsh approach to in-work benefits or punitive tax rises might be a thing of the past, beware the Chancellor whose hubris may force him to revive them after all. 

Chris Leslie is chair of Labour's backbench Treasury committee.