The budget: déjà vu all over again

Prepare for a rush to the calculators, writes Tullett Prebon's Tim Morgan.

How do you start a budget speech? Well, “stop me if you’ve heard this one before” would be appropriate, because, to quote Yogi Berra, this budget is likely to be a case of “déjà vu all over again”. The economy will, yet again, have confounded the serial optimists at the OBR. The deficit reduction plan will…er, yet again…have gone further adrift of the government’s plan. The debt target will – well, “yet again” – have slipped by another year.

This time, though, observers will need to keep their calculators handy if they are to figure out what is really happening. Whilst Mr Osborne is likely to disappoint sensation-seekers, lovers of the obscure will have a field-day.

One of the less scrupulous initiatives of the Nixon administration was the concept of “core inflation”. This, it was claimed, showed the real state of affairs if distorting variables were left out. The snag, of course, was that the things that Tricky Dickey wanted to omit were those very items – energy and food – whose prices were rising most rapidly at the time. Small wonder that one critic dubbed it “inflation ex-inflation”. It’s a bit like saying that “Britain had wonderful weather in 2012, if we exclude the days on which it rained”.

The Treasury, it seems, is lining up a similar exercise in smoke-and-mirrors for the budget, arguing that the British economy looks fine and dandy if the weak bits (principally, finance and the North Sea) are left out. They could take this even further, of course, showing how the economy looks really terrific if we also leave out construction, real estate, retailing and the state-funded sectors…

If this is indeed a line that the Treasury pushes, it will join another piece of legerdemain which will portray a deficit of about 7.8% of GDP as something closer to 5.1% by including within the fiscal numbers, amongst other things, the £28bn assets (but not the £37bn liabilities) of the Royal Mail pension fund, taken over by the state in April.

Behind the statistical smoke, the reality is that Britain combines one of the developed world’s most troubled economies with one of its worst deficits. The biggest source of frustration for objective observers, however, will doubtless be yet another repetition of the sterile debate between plans A and B, with the government claiming that Britain’s policies would be working were it not for global economic conditions (‘it’s those foreigners again’), whilst Labour, ignoring the £1.1 trillion that has already been pumped into the economy, calls upon ministers to borrow Britain’s way out of a debt problem.

Considering the economy on a basis which excludes financial services would, of course, be ludicrous, because assessing Britain ex-banking is about as rational as evaluating Saudi ex-oil. Politicians who spent decades wooing the City seem now to have forgotten that it’s the financial sector which alone earns the foreign currency to pay for essential imports such as food (a deficit of -£18.7bn last year) and energy (-£21.3bn).

Let’s be clear that there is one initiative, above all, that could get the economy moving, and that is house-building. Unfortunately, the only way in which this could work – a state-financed programme of building council houses – contradicts the mantra of government ideology. Ministers would prefer to encourage private sector developers, but this idea is a non-starter. With the over-valued property market already critically exposed to interest rate risk, developers are not going to commit to building over-priced properties any more than mortgage lenders are going to rush to finance them.

Just this once, the government should sacrifice ideology to the public interest, and start building council houses, funding this from savings in current expenditure.

This post originally appeared on the Tullet Prebon Research blog, and is reposted here with permission.

Photograph: Getty Images/Edited: Alex Hern

Tim Morgan is the Global Head of Research for Tullett Prebon, an international broker.

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Donald Trump vs Barack Obama: How the inauguration speeches compared

We compared the two presidents on trade, foreign affairs and climate change – so you (really, really) don't have to.

After watching Donald Trump's inaugural address, what better way to get rid of the last few dregs of hope than by comparing what he said with Barack Obama's address from 2009? 

Both thanked the previous President, with Trump calling the Obamas "magnificent", and pledged to reform Washington, but the comparison ended there. 

Here is what each of them said: 

On American jobs

Obama:

The state of our economy calls for action, bold and swift.  And we will act, not only to create new jobs, but to lay a new foundation for growth.  We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together.  We'll restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost.  We will harness the sun and the winds and the soil to fuel our cars and run our factories.  And we will transform our schools and colleges and universities to meet the demands of a new age.

Trump:

For many decades we've enriched foreign industry at the expense of American industry, subsidized the armies of other countries while allowing for the very sad depletion of our military.

One by one, the factories shuttered and left our shores with not even a thought about the millions and millions of American workers that were left behind.

Obama had a plan for growth. Trump just blames the rest of the world...

On global warming

Obama:

With old friends and former foes, we'll work tirelessly to lessen the nuclear threat, and roll back the specter of a warming planet.

Trump:

On the Middle East:

Obama:

To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect. To those leaders around the globe who seek to sow conflict, or blame their society's ills on the West, know that your people will judge you on what you can build, not what you destroy. 

Trump:

We will re-enforce old alliances and form new ones and unite the civilized world against radical Islamic terrorism, which we will eradicate completely from the face of the earth.

On “greatness”

Obama:

In reaffirming the greatness of our nation we understand that greatness is never a given. It must be earned.

Trump:

America will start winning again, winning like never before.

 

On trade

Obama:

This is the journey we continue today.  We remain the most prosperous, powerful nation on Earth.  Our workers are no less productive than when this crisis began.  Our minds are no less inventive, our goods and services no less needed than they were last week, or last month, or last year.  Our capacity remains undiminished.  

Trump:

We must protect our borders from the ravages of other countries making our product, stealing our companies and destroying our jobs.

Protection will lead to great prosperity and strength. I will fight for you with every breath in my body, and I will never ever let you down.

Stephanie Boland is digital assistant at the New Statesman. She tweets at @stephanieboland