Forever in his shadow: George Osborne has yet to achieve the more modest targets of his predecessor, Alistair Darling. Photo: Getty Images
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Budget 2015: George Osborne misses his targets again

George Osborne has offered some reprieve on austerity. Let’s hope it gets used wisely.

The usual politics of elections might dictate promising lots of goodies during the campaign and tightening the purse strings once safely in Government. George Osborne appears to have somewhat turned this upside down. The Conservative manifesto promised to eliminate borrowing by 2018-19. Today’s budget speech pushed back the deadline to 2019-20.

Annual day-to-day departmental spending is to be cut by just under £18 billion by 2019-20, or around five per cent in real terms. That doesn’t sound too bad: the OBR says that no year will see cuts as severe as in 2011-12 and 2012-13. However, not all is rosy. Where public spending goes is still seeing big changes. Promises for some public services will mean difficult choices for others. The NHS is to receive an extra £10 billion in real terms by 2020-21, and the MoD budget is to rise by 0.5 per cent in real terms a year. Prior to the election, promises were made on schools funding and international aid. Taken together, this could mean day-to-day spending rising by just under £10 billion by 2019-20 in some areas.

So other public services will still need to make substantial savings to pay for money going to the NHS, schools, aid and defence. However, departments will have more time to find the full savings needed, with the deadlines now pushed back. That’s important because after the last Parliament, the easiest savings will have already been made. In the SMF’s pre-Budget publication, One More Time, we argue that Government will need to take more time in trying to identify the next tranche of savings. Most likely, big reforms will be needed that look ahead to the longer-term challenge of an ageing population, as pointed out in the OBR’s Fiscal Sustainability Review. Giving departments breathing room to do this will ensure that big reforms are not rushed through at a higher price later on.

We will need to wait until the Autumn Spending Review to find out how different departments are set to share the cuts. However, an important principle that must run through the entire Spending Review programme is the need for investment in long-term growth to deliver sustainable rising incomes. Here, there may be reasons to worry. Whilst there is to be a levy on firms is to raise additional sums to fund apprenticeships, gross investment spending has been marked down compared to the March Budget. The roads investment fund paid for by Vehicle Excise Duty will only kick in at the end of the Parliament. The new fiscal rule targeting overall borrowing including investment also increases the vulnerability of capital spending.

Given the UK’s record on productivity, now is not the time to slow down on capital investment. George Osborne has offered some reprieve on austerity. Let’s hope it gets used wisely.

Nida Broughton is Senior Economist at the Social Market Foundation.

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Five things we've learned from Labour conference

The party won't split, Corbynite divisions are growing and MPs have accepted Brexit. 

Labour won't split anytime soon

For months, in anticipation of Jeremy Corbyn’s re-election, the media had speculated about the possibility of a Labour split. But the party’s conference confirmed that MPs have no intention of pursuing this course (as I had long written). They are tribally loyal to Labour and fear that a split would prove electorally ruinous under first-past-the-post. Many still expect Theresa May to hold an early general election and are focused on retaining their seats.

Rather than splitting, Corbyn’s opponents will increase their level of internal organisation in a manner reminiscent of the left’s Socialist Campaign Group. The “shadow shadow cabinet” will assert itself through backbench policy committees and, potentially, a new body (such as the proposed “2020 group”). Their aim is to promote an alternative direction for Labour and to produce the ideas and organisation that future success would depend on.

MPs do not dismiss the possibility of a split if their “hand is forced” through a wave of deselections or if the left achieves permanent control of the party. But they expect Labour to fight the next election as a force at least united in name.

Neither the Corbynites nor the rebels have ultimate control 

Corbyn’s second landslide victory confirmed the left’s dominance among the membership. He increased his winning margin and triumphed in every section. But beyond this, the left’s position is far more tenuous.

The addition of Scottish and Welsh representatives to the National Executive Committee handed Corbyn’s opponents control of Labour’s ruling body. Any hope of radically reshaping the party’s rule book has ended.

For weeks, Corbyn’s allies have spoken of their desire to remove general secretary Iain McNicol and deputy leader Tom Watson. But the former is now safe in his position, while the latter has been strengthened by his rapturously received speech.

Were Corbyn to eventually resign or be defeated, another left candidate (such as John McDonnell) would struggle to make the ballot. Nominations from 15 per cent of MPs are required but just six per cent are committed Corbynites (though selection contests and seat losses could aid their cause). It’s for this reason that allies of the leader are pushing for the threshold to be reduced to five per cent. Unless they succeed, the hard-left’s dominance is from assured. Were an alternative candidate, such as Clive Lewis or Angela Rayner, to succeed it would only be by offering themselves as a softer alternative.

Corbynite divisions are intensifying 

The divide between Corbyn’s supporters and opponents has recently monopolised attention. But the conference showed why divisions among the former should be interrogated.

Shadow defence secretary Clive Lewis, an early Corbyn backer, was enraged when his speech was amended to exclude a line announcing that Labour’s pro-Trident stance would not be reversed. Though Lewis opposes renewal, he regards unilateralism as an obstacle to unifying the party around a left economic programme. The longer Corbyn remains leader, the greater the tension between pragmatism and radicalism will become. Lewis may have alienated CND but he has improved his standing among MPs, some of whom hail him as a bridge between the hard and soft left.

Elsewhere, the briefing against McDonnell by Corbyn allies, who suggested he was an obstacle to recruiting frontbenchers, showed how tensions between their respective teams will remain a story.

Labour has accepted Brexit

Ninety four per cent of Labour MPs backed the Remain campaign during the EU referendum. But by a similar margin, they have accepted the Leave vote. Jeremy Corbyn and John McDonnell, both long-standing eurosceptics, confirmed that they would not seek to prevent Brexit.

Owen Smith called for a referendum on the eventual deal during his leadership campaign. But with some exceptions, such as Angela Eagle, most of his backers have rejected the idea. Though 48 per cent of the electorate voted Remain, MPs emphasise that only 35 per cent of constituencies did. Some still fear an SNP-style surge for Ukip if Labour seeks to overturn the outcome.

The debate has moved to Britain’s future relationship with Europe, most notably the degree of free movement. For Labour, like Theresa May, Brexit means Brexit.

Corbyn will not condemn deselections 

The Labour leader could have won credit from MPs by unambiguously condemning deselection attempts. But repeatedly invited to do so, he refused. Corbyn instead defended local parties’ rights and stated that the “vast majority” of MPs had nothing to fear (a line hardly reassuring to those who do). Angela Eagle, Stella Creasy and Peter Kyle are among the rebels targeted by activists.

Corbyn can reasonably point out that the rules remain the same as under previous leaders. MPs who lose trigger ballots of their local branches face a full and open selection. But Labour’s intensified divisions mean deselection has become a far greater threat. MPs fear that Corbyn relishes the opportunity to remake the parliamentary party in his own images.  And some of the leader’s allies hope to ease the process by reviving mandatory reselection. Unless Corbyn changes his line, the issue will spark continual conflict. 

George Eaton is political editor of the New Statesman.