Sensible and measured OBR approach now needs to be matched by a more balanced political debate
It does not require an unduly suspicious mind to see that public opinion has been expertly softened up since the general election in readiness for the budget next week. First came the George Osborne and David Laws instant austerity programme. Then, playing hard cop, David Cameron said that the overall scale of the government's fiscal problem was "even worse than we thought", requiring "unavoidably tough" measures affecting "our whole way of life". Yesterday, echoing comments last week by Labour's former City minister Lord Myners, Nick Clegg played nice cop, insisting that to ignore the deficit is to betray progressive values, since the failure to cut will mean spending more on debt than on schools and services. Late yesterday, Mr Osborne weighed in again in the Commons, taunting Labour with having pencilled in £44bn worth of unspecified cuts of its own in the event of its re-election. The ruthless skill of the government's cuts choreography operation demands a sort of respect.
So far, so well orchestrated. And yet, very significantly, yesterday's pre-budget forecast from the new Office for Budget Responsibility failed to quite follow this dangerously determinist script. That is not in any way to imply that the OBR's first official forecast arrived stuffed with unexpectedly robust good news. On the contrary. The economy will grow by only 2.6% in 2011, compared with the 3.25% predicted by Alistair Darling in his own budget three months ago. Over the four years from 2011, growth will average only 2.75%, and will decline in 2014. The 2010-11 borrowing figure, on the other hand, has now been revised down from the £163bn predicted by Labour to £155bn now. As a result, while the chancellor was able to taunt Labour with having bequeathed the coalition one of the highest budget deficits in the developed economic world, his predecessor was also able to draw plenty of conviction from the OBR figures to support very different but equally valid conclusions.
In fact, it may be possible to see yesterday's Commons exchanges between Mr Osborne and Mr Darling as the moment when the opposition first managed to get its act together on a large issue in the new parliament. While Mr Osborne took yesterday's figures as permission for the large cuts and possible tax-raising programme that he will outline next week, Mr Darling used them to make a case that has not been sufficiently heard since 6 May for a much more cautious approach that would stimulate growth and not put the fragile recovery at risk. Both sides nevertheless have large blind spots in their arguments. Labour barely even acknowledges that cuts to pay down the deficit are unavoidable, never mind gives any detail or acknowledges any share of responsibility – a reflection, perhaps, of the distorting effect which the leadership election is having on Labour's ability to make a credible case on the deficit. Yet the coalition is in a very dangerous denial of its own about the economic risk that an abrupt reduction of the public sector would create. The danger of a double-dip recession is an extremely real one. Neither side does justice to the full picture painted by the OBR.
The OBR possesses no magic powers that other forecasters do not have. But the combination of access and independence – as well as the general reputation of Sir Alan Budd and his colleagues – already give it an authority which the Treasury's own more politically infected forecasts no longer have in the post-Brown era. But the sensible and measured OBR approach now needs to be matched by a more balanced political debate. It is no more acceptable for the coalition to pretend that excessive cuts, whether reactionary or progressive, do not risk deflationary consequences, than it is for Labour to pretend that reducing the deficit is an option rather than an obligation. Both sides are deferring too much to their ideologues. Grown-up politics demands that both stop doing so.
Copyright Speakers Corner 2017