In the aftermath of Osborne?s Budget ? with grannytax, pastygate and petrol panic dominating the headlines ? one key issue seems to have been forgotten: jobs and growth.
Labour party and lefties shouldn?t get giddy over polls showing people think the Tories are ?out of touch?: unfortunately they?ll tolerate ?out of touch? as long as they think Tories are setting the economy on a path to recovery. They?ll forget Grannytax soon enough.
But the economy is in fact the government?s biggest Achilles Heel. They?re only getting away with it because Labour doesn?t have laser-like focus.
There were two key developments in the Budget.
First, the Office for Budget Responsibility admitted Osborne?s budget would make negligible difference to UK?s economic growth. In other words, the Tories have given up trying the ?most pro-growth budget ever? rhetoric.
They?ve given up on growth. Osborne knows we?re heading for another year of economic stagnation, and no one has bothered to pull him up on it. All those big growth initiatives came to jot. Zilch. Nada. So much for the ?expansionary fiscal contraction? revolution they were going to unleash.
And then there was the long-term outlook ? at which point the Libdems should be really worried (they?re the ones facing an existential crisis, not the Tories).
Osborne?s growth projections until 2016 are also likely to fail.
How do I know this? Over the last year, most of UK?s growth predicted by Osborne was meant to come from increased business investment. In 2011 business investment was meant to soar by 8.1%. By 2012 this was meant to jump to 10%. In fact, over 2011, business investment actually fell by 2.0%.
But it gets worse! Osborne has (unsurprisingly) reduced projections for growth in business investment going forward. What is that replaced with? Erm, consumer spending.
That?s right. Even though wages are falling and the government is cutting more jobs and spending ? Osborne predicts that consumer spending will miraculously keep the British economy afloat.
As Duncan Weldon points out here:
In fact private consumption will now drive over 50% of all GDP growth in the period to 2016. The household savings ratio (the percentage of their income that households save) is forecasted to fall every year from 2012 until 2016. By the second quarter of 2014 the household sector is expected to become a net borrower from the rest of the economy. This all seems suspiciously like the growth before the crash that Osborne explicitly set out to avoid.
Just to be clear: Osborne expects that households will increase their borrowing to spend money, just so the economy can limp on at a slow rate.
Anyone see the problem here? To summarise: the Tories are going to fail at their singular objective ? growing the British economy. As a result of that, they?ll also have problems cutting the deficit.
If I were a Libdem or a backbench Tory MP, I?d start agitating for some fresh thinking. Osborne is out of ideas and he?s going to lead the government off a cliff.
liberalconspiracy.org/2012/04/02/forget-pasties-and-petrol-osborne-is-the-coalitions-real-achilles-heel/