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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A man who accused a gay donkey of trying to rape his horse runs for Ukip leader

Another high-quality candidate.

John Rees-Evans, the Ukip candidate for Cardiff South and Penarth in the 2015 general election, is the latest to enter the Ukip leadership contest. And just as your mole thought bigotbait factory Breitbart’s Raheem Kassam was the fruitiest character in the running.

Rees-Evans, a Wales-based Ukipper who used to be in the army, is best-known for a bizarre story he told protesters outside his office in 2014. In which he accused a gay donkey of trying to rape his horse.

Having been asked to respond to a comment by a fellow party member – Julia Gasper – claiming “some homosexuals prefer sex with animals”, Rees-Evans replied:

“Actually, I’ve witnessed that. Yes! I was personally quite amazed. I’ve got a horse and it was there in the field. My horse is a stallion, right. And a donkey came up, which was male, and I’m afraid tried to rape my horse . . .

“So in this case, it’s obviously correct because the homosexual donkey tried to with an animal. But I don’t think that’s what it meant, it’s just a bizarre coincidence.”

Since making his bid for Ukip’s leadership, Rees-Evans has had to take back his controversial claim about the gay donkey on the BBC’s Daily Politics.

He said:

“It was a bit of playful banter with a mischievous activist, OK? . . . I concede it was a mistake to be playful with an activist in the street. The point is I’m not a politician. The guy was just asking me questions in the street. It was an error of judgement. I was very early coming into politics and I’m sorry if I offended anyone by doing that but please can we move on?”


Rees-Evans also made headlines by telling VICE that he persuaded IKEA staff to let him take a gun into a branch of IKEA in Bulgaria last year to protect him in the event of a terrorist siege.

Your mole thinks Nigel Farage is beginning to look like Abraham Lincoln.

I'm a mole, innit.