Will Osborne's two Budget nightmares come true?

If the OBR forecasts a triple-dip recession and a higher deficit this year, the Chancellor's failure will be clearer than ever.

After a notable absence of Budget leaks, last night brought a slew of pre-briefed announcements. Today's Sun reveals that Osborne will scrap next month's 6p rise on a pint of beer and abolish the beer duty escalator, while the Guardian reports that he will announce an increase in the personal allowance to £10,000, a year ahead of schedule, and either delay or cancel the fuel duty rise. After last year's disastrous decision to abolish the 50p tax rate, brilliantly framed by Labour as the "millionaires' tax cut", all three measures are intended to signal that the Chancellor's priority is now reducing the cost of living for those famed "hardworking families". Osborne has wisely resisted calls from the Thatcherite right to abolish capital gains tax or slash corporation tax to an Irish-style 11 per cent - measures that would largely benefit the well-off. 

But what we won't get until the Chancellor stands up at 12:30pm are the Office for Budget Responsibility's updated forecasts for growth, borrowing and employment - and here's where the pain could lie for Osborne.

For the fifth time since it was established, the OBR is expected to downgrade its growth forecasts. Growth in 2013, which was predicted to be 1.2 per cent in the Autumn Statement, is now likely to be only half that amount. But the most important figure, for the Chancellor's immediate political prospects, will be that for the first quarter of this year. It is this number that will determine whether Britain has suffered an unprecedented "triple-dip recession". We won't get the first estimate from the Office for National Statistics until 26 April but a negative forecast from the OBR would make it far harder for Osborne to claim that "we're on the right track". A third recession in four years is the Chancellor's first nightmare. 

The second is a higher deficit. Until now, even as growth has disappeared, the Chancellor has been able to boast that borrowing "is falling" and "will continue to fall each and every year". But today, for the first time since he entered the Treasury, Osborne will almost certainly be forced to announce that the deficit is forecast to be higher this year than last. Even with the addition of £2.3bn from the auction of the 4G mobile spectrum, borrowing is currently £3bn higher than in 2012. 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". Expect Robert Chote and his fellow number-crunchers to announce that fate has failed to favour the Chancellor. 

The combination of a shrinking economy and a rising deficit will add force to Labour's charge that austerity is "hurting but not working". With Osborne also expected to announce that the national debt won't begin to fall as a proportion of GDP until 2017-18 (two years behind schedule), even some Tory MPs are beginning to ask what all the pain has been for. 

To all of this, the Chancellor's inevitable riposte to Labour will be "but you would borrow even more!" One of the key tests for Ed Miliband (who, as leader of the opposition, will reply to Osborne, rather than Ed Balls) will be how or whether he seeks to rebut this charge.

Freddy Krueger from "Nightmare on Elm Street". Photograph: Getty Images

George Eaton is political editor of the New Statesman.

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Inside a shaken city: "I just want to be anywhere that’s not Manchester”

The morning after the bombing of the Manchester Arena has left the city's residents jumpy.

On Tuesday morning, the streets in Manchester city centre were eerily silent.

The commuter hub of Victoria Station - which backs onto the arena - was closed as police combed the area for clues, and despite Mayor Andy Burnham’s line of "business as usual", it looked like people were staying away.

Manchester Arena is the second largest indoor concert venue in Europe. With a capacity crowd of 18,000, on Monday night the venue was packed with young people from around the country - at least 22 of whom will never come home. At around 10.33pm, a suicide bomber detonated his device near the exit. Among the dead was an eight-year-old girl. Many more victims remain in hospital. 

Those Mancunians who were not alerted by the sirens woke to the news of their city's worst terrorist attack. Still, as the day went on, the city’s hubbub soon returned and, by lunchtime, there were shoppers and workers milling around Exchange Square and the town hall.

Tourists snapped images of the Albert Square building in the sunshine, and some even asked police for photographs like any other day.

But throughout the morning there were rumours and speculation about further incidents - the Arndale Centre was closed for a period after 11.40am while swathes of police descended, shutting off the main city centre thoroughfare of Market Street.

Corporation Street - closed off at Exchange Square - was at the centre of the city’s IRA blast. A postbox which survived the 1996 bombing stood in the foreground while officers stood guard, police tape fluttering around cordoned-off spaces.

It’s true that the streets of Manchester have known horror before, but not like this.

I spoke to students Beth and Melissa who were in the bustling centre when they saw people running from two different directions.

They vanished and ducked into River Island, when an alert came over the tannoy, and a staff member herded them through the back door onto the street.

“There were so many police stood outside the Arndale, it was so frightening,” Melissa told me.

“We thought it will be fine, it’ll be safe after last night. There were police everywhere walking in, and we felt like it would be fine.”

Beth said that they had planned a day of shopping, and weren’t put off by the attack.

“We heard about the arena this morning but we decided to come into the city, we were watching it all these morning, but you can’t let this stop you.”

They remembered the 1996 Arndale bombing, but added: “we were too young to really understand”.

And even now they’re older, they still did not really understand what had happened to the city.

“Theres nowhere to go, where’s safe? I just want to go home,” Melissa said. “I just want to be anywhere that’s not Manchester.”

Manchester has seen this sort of thing before - but so long ago that the stunned city dwellers are at a loss. In a city which feels under siege, no one is quite sure how anyone can keep us safe from an unknown threat

“We saw armed police on the streets - there were loads just then," Melissa said. "I trust them to keep us safe.”

But other observers were less comforted by the sign of firearms.

Ben, who I encountered standing outside an office block on Corporation Street watching the police, was not too forthcoming, except to say “They don’t know what they’re looking for, do they?” as I passed.

The spirit of the city is often invoked, and ahead of a vigil tonight in Albert Square, there will be solidarity and strength from the capital of the North.

But the community values which Mancunians hold dear are shaken to the core by what has happened here.

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