Thursday News Review

Budget 2011 – reaction

George Osborne has bowed to growing concern over the biggest squeeze in living standards since the second world war with an instant cut in fuel duty, but had his claim to be delivering a budget for growth undermined by the ominous prospect of lower growth, rising unemployment and higher borrowing. While insisting the government was sticking to its austerity plan despite a gloomier outlook for the economy, the chancellor levied a surprise £2bn windfall tax on North Sea oil companies to finance a populist 1p a litre reduction in the price at the pumps as the unexpected finale of a reform package focused on reversing Britain’s economic decline. The chancellor said he was “putting fuel in the tank of the British economy” by liberalising Britain’s planning laws, scrapping red tape, simplifying the tax system and creating a Green Investment Bank to fund the expansion of environmental companies. But he was forced to admit that growth this year would be just 1.7% – lower than the 2.1% expected – while 200,000 fewer jobs would be created during this parliament. Figures from the independent Office for Budget Responsibility showed slower growth would result in £45bn extra borrowing between now and 2015. – the Guardian

The Chancellor announced a £2 billion-a-year windfall levy on North Sea oil to fund an immediate cut in fuel duty of 1p per litre. He also postponed a 5p rise in fuel duty due next month and introduced a fuel price stabiliser to keep costs at the pumps down… Elsewhere, Mr Osborne announced a staged 3p cut in corporation tax, a £326 tax cut for 23 million low to middle earners and a fund to help first-time house buyers. But these were among few giveaways in a Budget dictated by the stagnant state of the economy. The Chancellor was forced to admit that growth would be slower than expected over the next two years and that he would have to borrow more than originally forecast to plug the gap in the public finances. He refused to change his strategy for cutting the deficit, saying: “We have a plan and we’re sticking to it.”… The announcements were welcomed by motorists and business groups. However, economists pointed out that the small savings to households were likely to be dwarfed by sharp tax rises that had already been announced and come into force next month. – the Telegraph

It is getting hairy. This only works if we get decent growth – solid thumping growth of close to 3 per cent a year by the back end of this parliament. If we get that, the national debt levels out and starts to come down as a percentage of GDP. If we don’t – and the challenge will be to grow faster than the rest of the EU and well above our long-term trend – then it is not just the Coalition that is in trouble. We all are. So is this really a Budget for growth? Well it is not a Budget against growth, and since the main business bodies have given it a general welcome, that’s a start. But the debt mountain is as high as ever and if this Budget tells us anything, it is that we need things to come right in the next four years – or, in grander language, for a lot of the economic variables to turn out to be towards the more favourable end of the possible scale. So far, looking at our latest growth and inflation numbers, rather the reverse seems to be happening. – the Independent

Ed Miliband lambasted George Osborne as “the wrong Chancellor” yesterday, accusing him of putting the recovery at risk and squeezing living standards by cutting public spending “too far and too fast”. The Labour leader denounced Mr Osborne for pursuing the wrong economic course, pointing to faltering growth, rising inflation and growing unemployment as evidence that the tough medicine was not working. He argued that the centrepiece measures of the Budget – the rise in income tax thresholds and the 1p cut in fuel duty – were dwarfed by other tax increases in the pipeline. Producing an instant response to a Budget statement – even a leaked one – is one of the toughest jobs in Parliament and Mr Miliband frequently struggled to make himself heard in rowdy Commons scenes. Lindsay Hoyle, the Deputy Speaker, was forced to appeal for calm as MPs hurled insults across the chamber. Mr Miliband deployed a series of jokes crafted by his new press team to deride the Coalition’s strategy and accuse it of ideological inflexibility.- the Independent

Ed Miliband said George Osborne’s fuel duty cut in Wednesday’s budgetamounted to “Del Boy economics”, coming at the same time as a 3p increase in VAT. In his Commons response, the Labour leader seized on figures from the Office for Budget Responsibility predicting a contraction for the UK economy: “What is the chancellor’s singular achievement? To deliver a budget for growth that downgrades the growth forecast.” “Every time he comes to this house, growth is downgraded,” Miliband said. “One fact says it all and he couldn’t bring himself to say it: growth down last year, this year and next year. It’s the same old Tories – it’s hurting but it isn’t working.” Labour drew attention to work published the morning of the budget by the OBR which they said suggested the reduced growth would mean unemployment could go up every year by “up to 200,000”. The opposition believes the government’s decision to index direct taxes by CPI (the consumer prices index) from April 2012 amounts to a tax rise. – the Guardian

In the absence of the budget, it is a good job that there were plenty of distractions in the Westminster game. Ed Miliband roused his troops with a feisty performance and decent jokes too. The right kind of snow for a skiing holiday was a funny shot, albeit a slightly low blow. Returning to the ‘no platform’ jibe against Nick Clegg may reverberate with other LibDems more than is in Labour’s longer-term interests. Nick Clegg demonstrated his new LibDem distancing strategy, pointedly refraining from any repeat of his hearty back-slap for Osborne during the glad, confident Coalition honeymoon of 2010. Ken Clarke added to the gaeity of the political nation by coming close enough to falling asleep to have the bookmakers pay out, compounding the entertainment with an official shut-eye denial. Ken, as Chancellor, had a balance between spending and taxes (50:50) which would much better suit the “we’re in this together” story which the ProgCons once intended to tell. That’s in the past now. But Ken’s tired eyelids may also have offered the most incisive snap judgement on today’s budget non-event. – Next Left

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