Is the first report from the Office for Budgetary Responsibility exactly what George Osborne was expecting when he set it up last month? While the idea was to have an independent body that would keep the Chancellor on the straight and narrow, fiscally speaking, Mr Osborne must also have hoped it would give him a mandate for the public spending cuts that he plans to make in next week's emergency budget and the autumn review.
If he was seeking some extra justification for the austerity measures that he, David Cameron and Nick Clegg have not stopped trying to soften us up for, the OBR did not provide it. Not only was the downsizing of the official Treasury economic growth forecast more modest than many people had expected, the OBR's figures on Government borrowing actually came in lower than the predictions made by Alistair Darling in his final Budget two months ago.
There are some technical reasons for this and one should note that the structural deficit, that part of borrowing that can't be put down to the recession, has been adjusted upwards by the OBR. Nevertheless, a Chancellor seeking covering fire for a full-scale assault on public spending will not find it in the pre-Budget report issued by Sir Alan Budd and his colleagues yesterday.
That is not to say the assault will now be downgraded to something that feels more like a raid. The OBR exists to police the Chancellor's fiscal policies, to provide an independent assessment of whether the Government is on course to borrow responsibly. But Mr Osborne is not fettered by any OBR strictures on undershooting – if he chooses to take a sharper axe to spending in order to get borrowing down more quickly, he can do so without censure from Sir Alan.
Still, the OBR's report has given the Government's critics some ammunition. Alistair Darling – remember him? – was touring the television studios yesterday repeating his pre-election warnings about the risk to the recovery that excessive cuts would pose. If the OBR is already projecting lower-than-expected borrowing, the former Chancellor added, why take that risk?
He would say that, of course. But it would be interesting to know what position the Liberal Democrats might now have taken had they not signed up to the coalition. Mr Clegg and colleagues such as Vince Cable were converted to the cause of early deficit reduction very quickly as they negotiated an agreement for coalition government. Might they have a different view now the OBR has reported?
Pension cream for fat-cat directors
Remember Sir Fred Goodwin's turbo-charged pension – the pay-off he got in return for stepping down from Royal Bank of Scotland without too much of a fight? Well, it may have taken almost two years for the penny to drop, but someone has finally worked out that what happened at RBS may not have been an isolated incident.
"Pensions are not linked to performance in the same way that annual pay, share options or bonuses are," says the National Association of Pension Funds today. "[We] are concerned that the generous pension terms found in many boardrooms could reward directors in their retirement, despite failure in the job."
The NAPF, which represents organisations with about £800bn of pension scheme assets, says it doesn't necessarily want to see directors' pensions cut – just better information about what they're receiving, so that shareholders can take an informed view on whether they're worth the money.
You're not kidding. While companies' remuneration reports have improved out of all recognition in recent times, the data relating to pension payments made to directors remains largely unintelligible. And not all of the juicy little goodies that many directors receive even have to be declared.
Moreover, while employers are paring back on pension benefits for the majority of their staff, the cuts do not appear to extend to the boardroom. Faster accrual rates in final salary schemes are standard, or at least much higher contributions to money purchase plans. Lower retirement ages are still common, as are special early retirement packages. And many directors have the option of avoiding the company plan and taking a generous cash payment instead.
One wonders too whether companies have begun to exploit the relative lack of transparency on pension benefits, boosting them for directors whose other benefits have come under closer scrutiny. Until we get the improvements in disclosure standards that the NAPF is demanding, we simply won't know.
Squeezing more money out of plastic
If, as expected, tax rises and higher interest rates take their toll on consumer spending, the retail sector is in for some torrid times over the months and years ahead. All the more reason for it to expect a fair deal from the banking sector, which must take much of the blame for the financial crisis, recession and ballooning borrowing to which all this austerity is a response.
If only. The British Retail Consortium's plea yesterday for a government crackdown on the charges that banks make for processing payments to shops and others made by debit or credit card deserves to be taken very seriously. This is a racket that the banks have been getting away with for far too long.
It cannot possibly be the case that the cost to a bank of handling a debit card transaction has doubled in the past five years, as the charges that retailers pay for this service have. Nor can it be the case that it costs a bank three times as much to process a credit card transaction as a payment made by debit card, yet this is what their charges suggest.
This looks like straightforward profiteering on the part of the banks, an attempt to squeeze more money out of one set of customers to make up for shortfalls elsewhere. Good luck to the BRC in its campaign for a better deal.
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