George Osborne’s fiscal time-bomb

George Osborne’s Conservative party conference speech was dull – empty rhetoric around proposals that had largely already been announced.  But there was one proposal that, if enacted, would be absolutely devastating.

In the speech, Osborne made a commitment to run a budget surplus by the middle of the next Parliament, i.e. 2017-8, with no sign of any real economic recovery.  So how would this be achieved?

The only logical answer is by making massive public expenditure cuts on a scale that would make the Coalition’s efforts look trivial.  The only alternative would be a substantial economic recovery and there is no sign of that happening; the economy remains in deep recession with no more than slight stirrings of growth which have not even begun to offset the effects of austerity.  The confidence fairy has as yet failed to put in an appearance.

I have been critical of Ed Balls in the past for his insistence in sticking to SR2013 spending limits for a year after 2015.  As I said before, at Labour’s conference Balls appeared to be loosening that commitment.  But Osborne has now given a very clear idication of where he wants to go, and there is now no excuse for saying the on economic policy, Labour and Tories are just the same.  Yes, I would like Balls to be bolder – much bolder in fact –  but the battle lines are clear.  Osborne has made an explicit commitment to eye-watering austerity.  The speech may have been boring, but this is the fiscal time-bomb ticking at its heart.

It’s now time for the Tories to come clean and say what they would cut to achieve this.

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2 thoughts on “George Osborne’s fiscal time-bomb

  1. Any attempt to achieve a budget surplus in a weak economy would fail. Osborne can’t even get the deficit below £100bn at the moment. That’s because if you try and squash down one part of the budget, another pops up, usually through increased transfer payments. Or tax revenues go down. It would be far better to do as Keynes suggested – look after unemployment and let the deficit look after itself.

  2. Pingback: Why does Ed Balls want to run a surplus in the next Parliament? | Notes from a Broken Society

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