IFS Untangles Osborne’s Surplus Forecast

Five weeks ahead of the Budget, the IFS has delivered a withering assessment of George Osborne’s target for a £10 billion surplus in 2019/20. This is effectively wonk speak for “it ain’t gonna happen”:

“At 80% of national income, the UK’s public sector net debt is high by recent standards and relative to most advanced economies… Achieving and maintaining a consistent surplus is challenging. The UK has not had more than three years of consecutive budget surpluses since 1952. Surpluses have not been common in other large advanced economies…”

The IFS warn the only way Osborne will be able to keep his promise of a budget surplus in 2019/20 is through more massive tax rises or further spending cuts.

“Unless a large surplus is planned, small forecasting changes could require sudden in year tax rises or spending cuts to ensure the mandate is met. Even if we start 2019– 20 with an expectation of a £10 billion surplus, previous experience suggests there would be a more than one-in-four chance that in-year tax rises or spending cuts would be needed to ensure an out-turn of any surplus at all.”

Hardly surprising that Osborne’s vows of budget responsibility are treated with derision by the experts given his squandermania has seen public sector debt double and he consistently failed to achieve his deficit forecasts in the last parliament. The IFS note that “The first official figures showing whether or not Mr Osborne has met his target of running a surplus in 2019–20 should be published days ahead of the 2020 general election”. If Osborne is Tory leader, voters will have a very clear indication of his performance just days before they go to the polls…

Guido suspects Osborne will copy the tactics of his predecessor Gordon Brown and raid pensions. Already we are being softened up with suspicious briefings about “pension reform”. Hold on to your wallets and prepare for a massive tax hike on pensions. This time on higher rate pension contributions, increasing the tax burden on the older and wealthier – predominantly Tory voters – who Osborne calculates have nowhere else to go politically…

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Quote of the Day

Dominic Raab wrote in his letter of resignation…

“This is, at its heart, a matter of public trust,” he told the PM, concluding: “I cannot reconcile the terms of the proposed deal with the promises we made to the country in our manifesto at the last election… I believe that the regulatory regime proposed for Northern Ireland presents a very real threat to the integrity of the United Kingdom. I cannot support an indefinite backstop arrangement, where the EU holds a veto over our ability to exit…”


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