It was pretty obvious when George Osborne promised last year to be running a surplus by 2020 that he was setting himself up to fail. He had the same ambition last parliament, and completely failed to eliminate the deficit.
But, deploying some rather clumsy sleight of hand (sleight of ham-fist?), the Chancellor has shuffled things around to ensure it won’t be impossible to meet his target by the end of this parliament. It has been called a “magic trick” by The Times and “a conjuror’s trick. And not a very good one at that” by the Guardian.
Needless to say, no one’s fallen for it. Here’s how he did it:
The Chancellor’s headache is that the economy is doing worse than was forecast four months ago, a windfall of £27bn identified for him by the OBR last November has actually turned out to be a £56bn black hole, and that he is tied to his own fiscal rule of running a surplus by 2020.
The deficit is currently in excess of £70bn. He couldn’t admit to parliament that he was definitely going to miss his target. So instead, he has a plan for £4bn of uncosted departmental cuts – to buy him time, in the hope that future growth will help him out and he can row back on this extra austerity if he needs to.
This is creative accountancy – as explained by the Guardian:
“Osborne has brought forward capital spending into the years before 2019-20. He has announced additional spending cuts for the final year of the parliament. He has deferred changes to corporation tax worth £6bn until that year. And he has increased public sector pension contributions by £2bn.”
He has essentially shuffled spending out of 2019-20, and shuffled extra savings into it.
And ta-dah! You get a £10bn surplus in 2020.
The OBR director Robert Chote rather pointedly stated that the Chancellor is “on course to achieve the letter of the mandate”.
Less smoke and mirrors, more forest fire and shards of broken glass.
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