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.

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The footie is back. Three weeks in and what have we learned so far?

Barcleys, boots and big names... the Prem is back.

Another season, another reason for making whoopee cushions and giving them to Spurs fans to cheer them up during the long winter afternoons ahead. What have we learned so far?

Big names are vital. Just ask the manager of the Man United shop. The arrival of Schneiderlin and Schweinsteiger has done wonders for the sale of repro tops and they’ve run out of letters. Benedict Cumberbatch, please join Carlisle United. They’re desperate for some extra income.

Beards are still in. The whole Prem is bristling with them, the skinniest, weediest player convinced he’s Andrea Pirlo. Even my young friend and neighbour Ed Miliband has grown a beard, according to his holiday snaps. Sign him.

Boots Not always had my best specs on, but here and abroad I detect a new form of bootee creeping in – slightly higher on the ankle, not heavy-plated as in the old days but very light, probably made from the bums of newborn babies.

Barclays Still driving me mad. Now it’s screaming from the perimeter boards that it’s “Championing the true Spirit of the Game”. What the hell does that mean? Thank God this is its last season as proud sponsor of the Prem.

Pitches Some groundsmen have clearly been on the weeds. How else can you explain the Stoke pitch suddenly having concentric circles, while Southampton and Portsmouth have acquired tartan stripes? Go easy on the mowers, chaps. Footballers find it hard enough to pass in straight lines.

Strips Have you seen the Everton third kit top? Like a cheap market-stall T-shirt, but the colour, my dears, the colour is gorgeous – it’s Thames green. Yes, the very same we painted our front door back in the Seventies. The whole street copied, then le toot middle classes everywhere.

Scott Spedding Which international team do you think he plays for? I switched on the telly to find it was rugby, heard his name and thought, goodo, must be Scotland, come on, Scotland. Turned out to be the England-France game. Hmm, must be a member of that famous Cumbrian family, the Speddings from Mirehouse, where Tennyson imagined King Arthur’s Excalibur coming out the lake. Blow me, Scott Spedding turns out to be a Frenchman. Though he only acquired French citizenship last year, having been born and bred in South Africa. What’s in a name, eh?

Footballers are just so last season. Wayne Rooney and Harry Kane can’t score. The really good ones won’t come here – all we get is the crocks, the elderly, the bench-warmers, yet still we look to them to be our saviour. Oh my God, let’s hope we sign Falcao, he’s a genius, will make all the difference, so prayed all the Man United fans. Hold on: Chelsea fans. I’ve forgotten now where he went. They seek him here, they seek him there, is he alive or on the stairs, who feckin’ cares?

John Stones of Everton – brilliant season so far, now he is a genius, the solution to all of Chelsea’s problems, the heir to John Terry, captain of England for decades. Once he gets out of short trousers and learns to tie his own laces . . .

Managers are the real interest. So refreshing to have three young British managers in the Prem – Alex Neil at Norwich (34), Eddie Howe at Bournemouth (37) and that old hand at Swansea, Garry Monk, (36). Young Master Howe looks like a ball boy. Or a tea boy.

Mourinho is, of course, the main attraction. He has given us the best start to any of his seasons on this planet. Can you ever take your eyes off him? That handsome hooded look, that sarcastic sneer, the imperious hand in the air – and in his hair – all those languages, he’s so clearly brilliant, and yet, like many clever people, often lacking in common sense. How could he come down so heavily on Eva Carneiro, his Chelsea doctor? Just because you’re losing? Yes, José has been the best fun so far – plus Chelsea’s poor start. God, please don’t let him fall out with Abramovich. José, we need you.

Hunter Davies is a journalist, broadcaster and profilic author perhaps best known for writing about the Beatles. He is an ardent Tottenham fan and writes a regular column on football for the New Statesman.

This article first appeared in the 27 August 2015 issue of the New Statesman, Isis and the new barbarism