How Osborne manipulated spending to claim the deficit is falling

The IFS warns that the £10.9bn underspend is not an "economically optimal allocation of spending".

One of the biggest surprises in George Osborne's Budget speech was his announcement that the deficit is forecast to fall this year (although excluding all "special factors" it's actually set to rise). With borrowing so far this year £5.3bn higher than in 2012, it seemed there was no escape for the Chancellor. 

For the first time since he entered the Treasury, he would be forced to announce that the deficit was expected to rise in annual terms and Ed Balls would have his revenge (Osborne memorably bamboozled the shadow chancellor in last year's Autumn Statement by banking the 4G auction receipts early).

But yesterday, against expectations, he was able to announce that the deficit was forecast to be £120.9bn this year (2012-13), £100m less than last year (2011-12). So how did he do it? The answers are becoming clearer today. First, Osborne is forcing government departments to underspend by a remarkable £10.9bn in the final months of this financial year (including a £2.2bn NHS underspend). While some of this underspend is permanent, the rest, as the OBR document noted (see p.93) has been moved forward into future years. Public spending, it appears, has been manipulated in order to allow Osborne to boast that the deficit has fallen again. 

At its traditional post-Budget briefing, the Institute for Fiscal Studies called the Chancellor out on his financial trickery. Noting that the £10.9bn was around double the average of the previous five years (see graph), IFS head Paul Johnson said

There is every indication that the numbers have been carefully managed with a close eye on the headline borrowing figures for this year. It is unlikely that this has led either to an economically optimal allocation of spending across years or to a good use of time by officials and ministers.
 
That the deficit is forecast to shrink by the minimum amount required for Osborne to claim that borrowing has fallen (£100m) is clear evidence that the underspend was motivated by political calculations, rather than economic ones.
 
As well as squeezing Whitehall spending, Osborne also saved money by, in the words of the OBR, delaying payments to some "international institutions" until next year. When I spoke to the Treasury press office, they cited the example of a £15m payment by the Department for International Development to Green Africa Power. The spokesman refused to confirm whether the institutions affected included the UN and the World Bank. Regardless, it is now clear that Osborne's creative accounting puts Gordon Brown to shame. 
Chancellor of the Exchequer George Osborne leaves number 11 Downing Street in central London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Labour's establishment suspects a Momentum conspiracy - they're right

Bernie Sanders-style organisers are determined to rewire the party's machine.  

If you wanted to understand the basic dynamics of this year’s Labour leadership contest, Brighton and Hove District Labour Party is a good microcosm. On Saturday 9 July, a day before Angela Eagle was to announce her leadership bid, hundreds of members flooded into its AGM. Despite the room having a capacity of over 250, the meeting had to be held in three batches, with members forming an orderly queue. The result of the massive turnout was clear in political terms – pro-Corbyn candidates won every position on the local executive committee. 

Many in the room hailed the turnout and the result. But others claimed that some in the crowd had engaged in abuse and harassment.The national party decided that, rather than first investigate individuals, it would suspend Brighton and Hove. Add this to the national ban on local meetings and events during the leadership election, and it is easy to see why Labour seems to have an uneasy relationship with mass politics. To put it a less neutral way, the party machine is in a state of open warfare against Corbyn and his supporters.

Brighton and Hove illustrates how local activists have continued to organise – in an even more innovative and effective way than before. On Thursday 21 July, the week following the CLP’s suspension, the local Momentum group organised a mass meeting. More than 200 people showed up, with the mood defiant and pumped up.  Rather than listen to speeches, the room then became a road test for a new "campaign meetup", a more modestly titled version of the "barnstorms" used by the Bernie Sanders campaign. Activists broke up into small groups to discuss the strategy of the campaign and then even smaller groups to organise action on a very local level. By the end of the night, 20 phonebanking sessions had been planned at a branch level over the following week. 

In the past, organising inside the Labour Party was seen as a slightly cloak and dagger affair. When the Labour Party bureaucracy expelled leftwing activists in past decades, many on went further underground, organising in semi-secrecy. Now, Momentum is doing the exact opposite. 

The emphasis of the Corbyn campaign is on making its strategy, volunteer hubs and events listings as open and accessible as possible. Interactive maps will allow local activists to advertise hundreds of events, and then contact people in their area. When they gather to phonebank in they will be using a custom-built web app which will enable tens of thousands of callers to ring hundreds of thousands of numbers, from wherever they are.

As Momentum has learned to its cost, there is a trade-off between a campaign’s openness and its ability to stage manage events. But in the new politics of the Labour party, in which both the numbers of interested people and the capacity to connect with them directly are increasing exponentially, there is simply no contest. In order to win the next general election, Labour will have to master these tactics on a much bigger scale. The leadership election is the road test. 

Even many moderates seem to accept that the days of simply triangulating towards the centre and getting cozy with the Murdoch press are over. Labour needs to reach people and communities directly with an ambitious digital strategy and an army of self-organising activists. It is this kind of mass politics that delivered a "no" vote in Greece’s referendum on the terms of the Eurozone bailout last summer – defying pretty much the whole of the media, business and political establishment. 

The problem for Corbyn's challenger, Owen Smith, is that many of his backers have an open problem with this type of mass politics. Rather than investigate allegations of abuse, they have supported the suspension of CLPs. Rather than seeing the heightened emotions that come with mass mobilisations as side-effects which needs to be controlled, they have sought to joins unconnected acts of harassment, in order to smear Jeremy Corbyn. The MP Ben Bradshaw has even seemed to accuse Momentum of organising a conspiracy to physically attack Labour MPs.

The real conspiracy is much bigger than that. Hundreds of thousands of people are arriving, enthusiastic and determined, into the Labour party. These people, and their ability to convince the communities of which they are a part, threaten Britain’s political equilibrium, both the Conservatives and the Labour establishment. When the greatest hope for Labour becomes your greatest nightmare, you have good call to feel alarmed.