George Osborne stands behind the bar during a visit to officially re-open The Red Lion pub following a major refurbishment in Westminster on February 25, 2014. Photograph: Getty Images
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Budget 2014: behind the good economic headlines, warning lights are flashing

On half of the 20 key tests of economic success, Britain is faring very poorly.

George Osborne will come to the despatch box on Budget Day keen to trumpet the best economic figures since the start of the financial crisis. He will announce that the economy is growing, inflation is down and unemployment is falling. All true, but Osborne’s tone cannot be triumphant. The size of the economy remains smaller than in 2007 and family incomes are no higher than 2001. Worse still, behind the good headlines on recovery, warning lights are flashing for the future.

A Fabian Society report published last week set out 20 tests for economic success and found that on half of them Britain is faring very poorly, despite the recovery. We conclude that focusing just on GDP, inflation and unemployment is simply not enough. The Fabians propose that a future chancellor should abandon GDP growth as his main criteria for economic success and instead ask to be judged on growth in typical family incomes.

First, the grim news for British business: productivity has not increased since 2007, business investment is far below levels seen in the early 2000s and the gap between imports and exports is the widest since comparable records began. All of this suggests that the recovery is a more of a "dead cat bounce" than a return to long-term sustainable growth. Another measure of sustainability provides equal cause for concern: our emissions of greenhouse gases are not falling fast enough to meet carbon budgets for the rest of the decade, in spite of the sluggish economy.

The signs aren’t any better for family finances. It looks like most of the rewards from economic recovery are going to the wealthy, since the gap between the top one per cent and middle incomes is rising. Earnings remain flat, the number of families who don’t have enough to pay for the basics is up, and so too is the number of in debt. On top of all this, housing is now no more affordable than at the peak of the last boom.

So the Chancellor should really be using this Budget to confront Britain’s huge structural failings head on. We need a radical plan for national economic recovery focused on business long-termism and a fairer distribution of rewards which will ensure that consumer demand remains buoyant for decades to come. This won’t happen for as long as Osborne believes that public investment is negative, not positive. Over the weekend he proudly trailed a derisory billion pounds of extra investment, but only to be paid for by raiding existing department budgets. By contrast, Ed Balls has opened the way to borrowing for long-term investment, with his announcement on Labour’s fiscal rules at January’s Fabian New Year conference.

When it comes to fiscal matters, there may be a lot of sound and fury on Wednesday, but expect little real change. Osborne’s strategy is now pretty much locked down: the Chancellor wants to achieve an overall budget surplus and, by extension, a long-term reduction in the size of the state. If this really is the Conservative’s long-term strategy, it begs big questions about how the right intends to pay for healthcare and pensions for our ageing population and invest in skills and infrastructure for the future. This should be fertile ground for Labour to remake the case for government, but as things stand the opposition is feeling its way with great caution, burnt by the coalition’s united attacks on Labour’s public spending record before the crisis.

All this means that a net tax giveaway in the Budget would be a surprise. It would only be consistent with Osborne’s long-term plans if accompanied by yet more cuts, or if it could be justified by a significant change in the OBR’s forecast for the economy’s potential for growth. What’s much more likely is a big headline tax cut, paid for by less obvious tax rises elsewhere. Another increase in the income tax threshold will be a good response to Labour’s campaign on the "cost of living crisis". There are certainly many in Labour ranks who worry that in the run up to the general election, the promise of highly visible tax cuts will trump Ed Miliband’s more targeted efforts to address the living standards crisis through regulation.

For policy purists, an increase in the income tax threshold isn’t terribly sensible. Far better to reduce National Insurance for low paid workers. But it has acquired totemic significance for the coalition. Similarly, the argument over a 50p top rate of tax has acquired political weight far beyond the revenue raising or economic impacts of the policy. Labour knows it is on the right side of public opinion, but it is hardly the best way of designing taxation to ensure the rich pay more.

Privately, all the parties know that the tax system badly needs a much bigger overhaul. This needs to encompass the balance of tax between old and new economy; rich and poor; young and old; and between earnings, income, property and wealth. On top of all that we may well need more green taxes, despite the protests we can expect from the public and manufacturers.

But the annual spectacle of Budget showmanship is the wrong way to think through such major reforms. It is another example of the short-termist, confrontational politics that fails Britain. Whoever comes to power in 2015 should relegate the importance of the Budget and introduce institutional arrangements that force politicians to think ahead five years: Britain needs a long-term national strategy for sustainable growth and an independent review to design radical tax reforms.

Andrew Harrop is general secretary of the Fabian Society.

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Labour is launching a stealthy Scottish comeback - thanks to Jeremy Corbyn and the Daily Mail

The Scottish Labour strategy is paying off - and hard evidence that it works may be more plentiful come 8 June 2017

When I suggested to a senior Scottish Labour figure earlier this year that the party was a car crash, he rejected my assertion.

“We’re past that,” he said gloomily. “Now we’re the burnt-out wreck in a field that no-one even notices anymore.”

And yet, just as the election campaign has seen Jeremy Corbyn transformed from an outdated jalopy into Chitty Chitty Bang Bang magically soaring in the polls, Scottish Labour is beginning to look roadworthy again.

And it’s all down to two apparently contradictory forces – Corbyn and The Daily Mail.

Kezia Dugdale’s decision to hire Alan Roden, then the Scottish Daily Mail’s political editor, as her spin doctor in chief last summer was said to have lost her some party members. It may win her some new members of parliament just nine months later.

Roden’s undoubted nose for a story and nous in driving the news agenda, learned in his years at the Mail, has seen Nicola Sturgeon repeatedly forced to defend her government record on health and education in recent weeks, even though her Holyrood administration is not up for election next month.

On ITV’s leaders debate she confessed that, despite 10 years in power, the Scottish education system is in need of some attention. And a few days later she was taken to task during a BBC debate involving the Scottish leaders by a nurse who told her she had to visit a food bank to get by. The subsequent SNP attempt to smear that nurse was a pathetic mis-step by the party that suggested their media operation had gone awry.

It’s not the Tories putting Sturgeon on the defence. They, like the SNP, are happy to contend the general election on constitutional issues in the hope of corralling the unionist vote or even just the votes of those that don’t yet want a second independence referendum. It is Labour who are spotting the opportunities and maximising them.

However, that would not be enough alone. For although folk like Dugdale as a person – as evidenced in Lord Ashcroft’s latest polling - she lacks the policy chops to build on that. Witness her dopey proposal ahead of the last Holyrood election to raise income tax.

Dugdale may be a self-confessed Blairite but what’s powering Scottish Labour just now is Jeremy Corbyn’s more left-wing policy platform.

For as Brexit has dropped down the agenda at this election, and bread and butter stuff like health and education has moved centre stage, Scots are seeing that for all the SNP’s left wing rhetoric, after 10 years in power in Holyrood, there’s not a lot of progressive policy to show for it.

Corbyn’s manifesto, even though huge chunks of it won’t apply in Scotland, is progressive. The evidence is anecdotal at the moment, but it seems some Scots voters find it more attractive than the timid managerialism of the SNP. This is particularly the case with another independence referendum looking very unlikely before the 2020s, on either the nationalists' or the Conservatives' timetable.

Evidence that the Scottish Labour strategy has worked may be more plentiful come 8 June 2017. The polls, albeit with small sample sizes so best approached with caution, have Ian Murray streets ahead in the battle to defend Edinburgh South. There’s a lot of optimism in East Lothian where Labour won the council earlier in May and MSP Iain Gray increased his majority at the Scottish election last year. Labour have chosen their local candidate well in local teacher Martin Whitfield, and if the unionist vote swings behind him he could overhaul sitting MP George Kerevan’s 7,000 majority. (As we learned in 2015, apparently safe majorities mean nothing in the face of larger electoral forces). In East Renfrewshire, Labour's Blair McDougall, the man who led Better Together in 2014, can out-unionist the Tory candidate.

But, while in April, it was suggested that these three seats would be the sole focus of the Scottish Labour campaign, that attitude has changed after the local elections. Labour lost Glasgow but did not implode. In chunks of their former west of Scotland heartlands there was signs of life.

Mhairi Black’s a media darling, but her reputation as a local MP rather than a local celebrity is not great. Labour would love to unseat her, in what would be a huge upset, or perhaps more realistically go after Gavin Newlands in the neighbouring Paisley seat.

They are also sniffing Glasgow East. With Natalie McGarry’s stint as MP ending in tears – a police investigation, voting in her wedding dress and fainting in the chamber sums up her two years in Westminster – Labour ought to be in with a chance in the deprived neighbourhoods of Glasgow’s east end.

Labour in Scotland doesn’t feel like such a wreck anymore. Alan Roden’s Daily Mail-honed media nous has grabbed attention. Corbyn’s progressive policies have put fuel in the tank.

After polling day, the party will be able to fit all its Scottish MPs comfortably in a small hatchback, compared to the double decker bus necessary just a few years back.

But this general election could give the party the necessary shove to get on to the long road back.

James Millar is a political journalist and founder of the Political Yeti's Politics Podcast. He is co-author of The Gender Agenda, which will be published July 21 by Jessica Kingsley Publishing.

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