Balls set for revenge as Osborne faces new failure on the deficit and debt

The Chancellor will be forced to announce that the deficit will be higher this year and that the debt won't fall until 2018.

When George Osborne delivered his first Budget in June 2010, he declared: "Unless we deal with our debts, there will be no growth." But the Chancellor has learned that the reverse is true – unless you stimulate growth, you can't deal with your debts. In last year's Autumn Statement, he abandoned his target of reducing debt as a proportion of GDP by 2015-16, extending it until 2016-17. Today's FT reports that the Budget will see this ambition further delayed until 2017-18 as the OBR downgrades its growth forecasts for the fifth time since it was created. Growth in 2013 is now expected to be just half of the 1.2 per cent predicted in December. 

But worse for Osborne, as I've previously reported, is that he will be forced to announce, for the first time since entering the Treasury, that borrowing is expected to be higher this year than last. Until now, even as growth has disappeared, the Chancellor has been able to boast that the deficit "is falling" and "will continue to fall each and every year". But no more. Even with the addition of £2.3bn from the auction of the 4G mobile spectrum, borrowing will still be greater than last year. With just two months' worth of figures to go (the figures for February will be published on Thursday), the deficit is currently £5.3bn higher than in 2012. To ensure it falls, Osborne would need to borrow £23.4bn or less in February and March, compared to £28.6bn last year. As the OBR noted last month, "to meet our autumn forecast would now require much stronger growth in tax receipts in the last two months of the year than we have seen since December, or much lower-than-forecast expenditure by central or local government". Ed Balls, who was wrongfooted last year when Osborne unexpectedly announced that the deficit would continue to fall (it later became clear that the Chancellor had mischievously bagged the 4G receipts early), will have his revenge.

The combination of a shrinking economy and a rising deficit will add force to Labour's charge that austerity is "hurting but not working". Even Conservative MPs are beginning to ask what all the pain has been for if the national debt won't begin to fall until 2018. Osborne is expected to meet his fiscal mandate to eliminate the structural deficit but since this is "a rolling five year" target that aim also won't be achieved until 2017-18. The Tories, however, are confident that they can turn this failure to their advantage. First, they can argue that Labour's response would be to "borrow even more". Following Vince Cable's recent intervention in the New Statesman, which saw the Business Secretary urge the government to borrow to invest, Balls is more confident about making the case for deficit-financed stimulus but Osborne believes that the public won't accept the argument that you can "borrow more to borrow less". Keynes's paradox of thrift is just too paradoxical. 

Second, if the next election is again fought over austerity, the Tories will argue that they, not Labour, are the best choice to "finish the job". While polls show that voters believe the government is cutting "too far and too fast", Cameron and Osborne continue to be rated above Balls and Miliband for economic competence. With further deficit reduction required, the Tories' hope is that voters will turn to the original axemen. It's for this reason that Miliband is determined to define the election as a contest between two competing visions of society and the economy, rather than as a narrow contest over austerity. How successful he is in doing so will do much to determine its outcome. 

George Osborne leaves 11 Downing Street on February 27, 2013 in London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

@Simon_Cullen via Twitter
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All 27 things wrong with today’s Daily Mail front cover

Where do I even start?

Hello. Have you seen today’s Daily Mail cover? It is wrong. Very wrong. So wrong that if you have seen today’s Daily Mail cover, you no doubt immediately turned to the person nearest to you to ask: “Have you seen today’s Daily Mail cover? It is wrong.”

But just how wrong is the wrong Mail cover? Let me count the ways.

  1. Why does it say “web” and not “the web”?
  2. Perhaps they were looking on a spider’s web and to be honest that makes more sense because
  3. How does it take TWO MINUTES to use a search engine to find out that cars can kill people?
  4. Are the Mail team like your Year 8 Geography teacher, stuck in an infinite loop of typing G o o g l e . c o m into the Google search bar, the search bar that they could’ve just used to search for the thing they want?
  5. And then when they finally typed G o o g l e . c o m, did they laboriously fill in their search term and drag the cursor to click “Search” instead of just pressing Enter?
  6. The Daily Mail just won Newspaper of the Year at the Press Awards
  7. Are the Daily Mail – Newspaper of the Year – saying that Google should be banned?
  8. If so, do they think we should ban libraries, primary education, and the written word?
  9. Sadly, we know the answer to this
  10. Google – the greatest source of information in the history of human civilisation – is not a friend to terrorists; it is a friend to teachers, doctors, students, journalists, and teenage girls who aren’t quite sure how to put a tampon in for the first time
  11. Upon first look, this cover seemed so obviously, very clearly fake
  12. Yet it’s not fake
  13. It’s real
  14. More than Google, the Mail are aiding terrorists by pointing out how to find “manuals” online
  15. While subsets of Google (most notably AdSense) can be legitimately criticised for profiting from terrorism, the Mail is specifically going at Google dot com
  16. Again, do they want to ban Google dot com?
  17. Do they want to ban cars?
  18. Do they want to ban search results about cars?
  19. Because if so, where will that one guy from primary school get his latest profile picture from?
  20. Are they suggesting we use Bing?
  21. Why are they, once again, focusing on the perpetrator instead of the victims?
  22. The Mail is 65p
  23. It is hard to believe that there is a single person alive, Mail reader or not, that can agree with this headline
  24. Three people wrote this article
  25. Three people took two minutes to find out cars can drive into people
  26. Trees had to die for this to be printed
  27. It is the front cover of the Mail

Amelia Tait is a technology and digital culture writer at the New Statesman.