Morning Call: pick of the papers

The ten must-read pieces from this morning's newspapers.

1. Intervention in Syria will escalate, not stop the killing (Guardian)

Russia and China blocked a bid to force regime change. But, says Seumas Milne, a negotiated settlement is the only way out of civil war.

2. How do we help get rid of President Bashar al-Assad? (Daily Telegraph)

Alex Spillius explains that unlike the former rebels in Libya, those in Syria are fragmented and don't control even a corner of the country.

3. Putin's fears are not for Assad but for himself (Times) (£)

Tony Brenton says that Russia's support for Syria is a diplomatic error forced by the rising tide of protest at home.

4. Don't let vested interests skew the NHS debate (Independent)

Doctors can, of course, have fair concerns; but they must be understood in context, says this leading article.

5. Deport Abu Qatada: or if not, give him the law's full protection (Guardian)

Qatada champions al-Qaida and delights in terrorist outrages. But Britain is robust enough to tolerate madcap clerics, says Simon Jenkins.

6. There's only half an answer to high pay: growth (Times) (£)

Nobody shouted about bonuses during the boom, says Daniel Finkelstein. Don't scare off private business and risk delaying recovery.

7. Crisis must not change India's course (Financial Times)

Eurozone and oil-price threats should not be exaggerated, warns Martin Wolf.

8. Why India needs aid (Guardian)

Most of its population are still poor. The row over British aid shows how many people confuse rapid growth with wealth, says Praful Bidwai.

9. Greece is being screwed down so Sarkozy can meet his deadline (Independent)

The motive and timing of Angela Merkel's support for the French president are interesting, says Hamish McRae.

10. The US feels sunny again while Britain shivers (Times) (£)

The two are conducting a controlled economic experiment, says Anatole Kaletsky. Now we can see the results.

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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.