George Osborne gave the Danish Finance minister Margrethe Vestager a lingering embrace during a meeting between Europe’s finance ministers in Luxembourg today. Seems he is keener on European Union than he is trying to make out to Tory backbenchers…

On the Today programme yesterday morning Ed Balls claimed Osborne has made a giant mistake and cuts in public spending are the same mistake made by Snowden in the 1930s. Balls is wrong, as a recent pamphlet from the Centre for Policy Studies by George Trefgarne shows. After the 1929-31 Wall Street Crash the British economy recovered rapidly in the 1930s:

If only we currently had a growth rate like they averaged in the thirties…

The Treasury’s £100bn bung of cheap loans to business is meant to install confidence in the economy. Previous similar actions on a smaller scale has not worked and no number is given for the expected take up. Asked on Today what will happen if this does not work, Treasury minister Mark Hoban said “we need to make this work!” Just the sort of language to inspire that much sought after confidence…

The Treasury has denied to Guido that a discreet Statutory Instrument is part of a secret contingency plan preparing for the potential collapse of the European Central Bank. At the end of May the government rushed through an order revoking the 1939 Trading with the Enemy Act, which prevented the UK from trading so-called Negotiable Instruments with former enemies – including former enemy Axis powers. The Act will now allow the UK to trade complex debt packages directly with EU countries, effectively allowing us to directly provide bailouts for European states unable to repay the money they owe to their British counterparts. Greece and Italy are on the list of countries that have now had their enemy status revoked for the purposes of dealing in their government’s debt paper.

The S.I. was slipped through quietly just before the Jubilee break at the end of May. Senior Treasury sources ignored our questions for weeks, until finally a junior press spokesman then directed Guido to Vince Cable’s  BIS. When Guido pointed out it was clearly a Treasury initiated Statutory Instrument they tried to play down the impact of the order, insisting that the existing legislation was obsolete and that it was simply an attempt to clean up the statute book. Yet with the Eurozone entering a new critical phase of financial crisis, the timing seems more than a coincidence…

This £10 billion bailout for the IMF brings the total Osborne has pledged to £40 billion, or some £666 for each and every man, woman and child in the Britain. In October last year after British taxpayers sent £9 billion to the IMF – £9 billion that Osborne had to borrow, Osborne told the House of Commons categorically:

“Britain will not be putting money into the bail-out fund either directly or through the IMF…. The IMF exists to support countries, it does not exist to support currencies… The IMF contributing money to the eurozone bail-out fund, no; Britain contributing money to the eurozone bail-out fund, no. That is Britain’s clear position.” 

The Chancellor could not be any more clear, he gave his word, it was an unqualified promise. Which Osborne has now broken.

This was the sort of headline Guido imagines they were going for:

Shame George’s biographer isn’t the Political Editor of all the newspapers…

Osborne’s budget has gone down like a bucket of sick on the front-pages this morning. As long as we have flat-lining growth and a failure of political will to tackle spending, all fiscally-neutral budgets will be like this, identifiable ‘losers’ will out-number identifiable ‘winners’. The losers this time are those who were prudent enough to save for their retirement. The so-called lucky generation of baby boomers who had a working life in a long term growing economy and an overly generous welfare state which has now impoverished their children and grand-children. Some might spin this as a bit of inter-generational payback, others as an unjust punishment of those who saved for their retirement. Pensioners have a propensity to be voters…

Osborne is spending more than Brown, borrowing more than Brown and taxing more than Brown. The official numbers revealed yesterday show that spending is still rising in real terms, there is no hope of for an “expansionary fiscal contraction” if there is no fiscal contracti0n. The national debt is still rising. The coalition government’s self-defined primary mission, to close the deficit by the next election, is on course for failure. As long as this obsession with fiscal neutrality and timidity towards cutting spending continues the tax burden will not be reduced, the debt will not be reduced and growth will flat-line. Fiscally neutrality is just another phrase for tinkering with the tax burden.

The bond markets already know the government is going to miss the deficit target. All the fast growing economies in Asia and the Americas have lower tax economies than the UK and Europe. A dash for growth stimulated by across the board tax cuts will not as Osborne fears be punished by the bond markets, that is a fundamental mis-reading of bond market mentality. Osborne knows bond markets think long term, that is why the Treasury is contemplating issuing 100 year bonds. Bond traders understand that broad tax cuts are a real stimulus that will lead to a more dynamic growing economy which will reap more tax revenues long term. Why are we waiting?

Click the above to download the PDF with hyperlinks. Rules are simple: choose one phrase, policy or scenario from each row, so eight overall. Listen out during the Chancellor’s statement, first to six wins. Don’t forget to shout “Budget Bingo”!

Ed Balls was on the Marr show this morning and also has an article in the Sunday Times ahead of the budget, advocating tax cuts to boost growth. He repeats his long-standing call for a reversal of the consumer whacking VAT hike and comes over like a born-again Nigel Lawson in his article:

…cut the basic rate of income tax by 3p for a year. Or raise the income tax personal allowance to more than £10,000… It would be better to cut VAT now — it’s fairer and quicker and would help pensioners and others who don’t pay income tax. But any substantial tax cuts to help households and stimulate the economy would be better than doing nothing.

Tax cuts won’t scare international bond markets, even the austerity friendly IMF is advocating a VAT cut for Britain, government gilts are propped up by QE (for now) so the issue of bond market vigilantism doesn’t arise.

It was a mistake to hike VAT and it is a strategic error to burden industry with crushingly high green taxes and penal marginal income tax rates of over 50% discouraging entrepreneurs from coming to invest in Britain. If the government is going to miss the deficit target, and it is, miss it because the government slashed taxes to grow the economy. The international bond markets will forgive a finance minister with a growing economy who misses his deficit target, they won’t forgive a finance minister with a contracting economy in any circumstances. Chancellor Zero knows that with no growth there is no hope for the deficit.

Last week’s shrinking GDP figures were spun by George Osborne as due to the crisis in the €urozone. The decline in GDP could hardly be blamed on the US market which is picking up and growing at a respectable 2.8% last quarter, nor on Asian markets where China grew at an annualised 8.9% and India at 7.8%.

Is the decline in UK GDP really, as George Osborne implies, down to economic trade with the crisis ridden continent falling? The answer is no.

UK exports to €urozone states actually rose a healthy 11.3% last year:

It is a myth that the decline in GDP has anything to do with the €uro-crisis leading to a decline in exports to the €urozone. The barriers to growth are a domestic problem…