George Osborne has found a Plan B – it's called the Bank of England

Inside Westminster: Labour risks winning the battle over whether cuts stalled growth but losing the war in 2015

Asked how he felt at the close at the close of play on Budget day on Wednesday, a close aide of George Osborne replied: “A lot better than I did 365 days ago.”

Last year’s Budget was such an omnishambles that the Chancellor is relieved to have avoided another disaster. A pretty low bar for a Budget – which was just as well as Mr Osborne had precious little money to play with. A repeat of last year’s performance would have put the Prime Minister under pressure to take seriously the demands by Conservative MPs who want Mr Osborne out.

Some MPs attack the Chancellor as a way of getting at the Prime Minister. But if this week’s Budget had bombed, Mr Cameron might have had to make a difficult decision about whether to oust his friend and closest political ally.

Instead, after conjuring something out of nothing, Mr Osborne looks safe until the 2015 election. Grabbing some positive headlines about beer, fuel and housing was good politics when the economic picture is so bleak. It wasn’t supposed to be by now. In the minds of senior Coalition figures, the economy would be growing and a “feel-good factor” would last until the 2015 election, by which time the Government could start sharing out the sweeties, a reward for swallowing the nasty medicine of spending cuts.

Instead, the political and economic cycles are now dangerously out of synch. The election will be a mere mid-point in the age of austerity – if we are lucky. Mr Osborne promised in his Budget speech to “level with people”. But I doubt very much that the parties will be totally honest with us when they produce their 2015 manifestos. To be sure, they will all talk a good game on the need to clear the deficit. But they won’t want to produce a manifesto that is a list of cuts.

There will be a debate in 2015 about whether we need more spending cuts or tax rises; the inconvenient truth, with growth so elusive, is that the next government will need more of both. The small print of this week’s Budget maintains the ratio of 80 per cent of the deficit being cleared by cuts and 20 per cent by tax rises.

But it adds that it “would be possible to do more of this further consolidation through tax instead”. This route might appeal to Labour and the Liberal Democrats, who both, for example, favour a mansion tax on homes worth more than £2m.

There would be a danger for Labour in particular in getting into a Dutch auction on cuts. Given a choice between two axe men, voters might prefer the one with a track record. “Fatalism about the economy and cynicism about politics are huge obstacles for us,” one Labour insider admits.

Ed Miliband and Ed Balls clearly have more work to do to achieve the economic credibility needed to get Labour over the winning line in 2015. Labour needs to say more about what it would cut or at least “switch-spend” from Tory plans.

The Coalition’s introduction of five-year fixed-term parliaments, meaning the next election will almost certainly be in May 2015, has allowed Labour to put off the evil day on cuts. It needs to get its skates on; last-minute rabbits out of the hat will not reassure those voters who still hold Labour at least partly responsible for the mess we’re in.

Labour is in danger of winning the battle over whether the cuts since 2010 have stalled growth, but still losing the next war in 2015. “The whole argument about whether we’re cutting too far and too fast – it’s in the past,” Lord Mandelson, Labour’s former Business Secretary, told a CBI dinner on Thursday. “It is predictable party political stuff and it is a bit tiring to the public.” He believes Mr Balls needs to say more about Labour’s past mistakes and to move on to how Labour would re-make the UK economy in the future, as Mr Miliband has done.

Labour wags dubbed Mr Osborne the “mañana Chancellor” after he delayed key pro-growth measures such as a £3bn-a-year boost to capital spending until 2015.

Where does the Chancellor think the elusive growth will come from? One Downing Street insider quipped that Mr Osborne has quietly implemented a “Plan B”, explaining: “It stands for Bank of England.” The review of the remit of the Bank’s Monetary Policy Committee will allow Mark Carney, the Canadian who takes over as Governor in June, to give more priority to growth and less priority to meeting the Bank’s 2 per cent inflation target. Mr Osborne’s words were cautious. He doesn’t want to gain a reputation as the man who let inflation rip, compounding the living standards crisis and hurting savers when interest rates are near zero.

The Chancellor believes privately that Sir Mervyn King, the outgoing Governor, could have done more to secure growth. His aides speak of evolution under Mr Carney but hope he will usher in a quiet revolution. Better late than never? Possibly. But a shame about the past two and a half years.

Arts and Entertainment
TVShow's twee, safe facade smashed by ice cream melting scandal
News
newsVideo for No campaign was meant to get women voting
News
A photo of Charles Belk being detained by police on Friday 22 August
news
News
news
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Sport
Alexis Sanchez celebrates after scoring his first goal for Arsenal in the Champions League qualifier against Besiktas
sportChilean's first goal for the club secures place in draw for Champions League group stages
Arts and Entertainment
Amis: 'The racial situation in the US is as bad as it’s been since the Civil War'
booksAuthor says he might come back across Atlantic after all
Extras
indybest
Life and Style
Google Doodle celebrates the 200th birthday of Irish writer Sheridan Le Fanu
tech
Arts and Entertainment
Vinyl demand: a factory making the old-style discs
musicManufacturers are struggling to keep up with the resurgence in vinyl
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Sustainability Assessor

Competitive: The Green Recruitment Company: Job Title: Sustainability Assessor...

Music Teacher

£110 - £150 per day + Mileage and Expenses: Randstad Education Leeds: We are l...

A Level Chemistry Teacher

Negotiable: Randstad Education Manchester Secondary: Part-time A Level Chemist...

Teaching Assistant

£12000 per annum: Randstad Education Manchester Secondary: Secondary Teaching ...

Day In a Page

Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone
Amazon is buying Twitch for £600m - but why do people want to watch others playing Xbox?

What is the appeal of Twitch?

Amazon is buying the video-game-themed online streaming site for £600m - but why do people want to watch others playing Xbox?
Tip-tapping typewriters, ripe pongs and slides in the office: Bosses are inventing surprising ways of making us work harder

How bosses are making us work harder

As it is revealed that one newspaper office pumps out the sound of typewriters to increase productivity, Gillian Orr explores the other devices designed to motivate staff
Manufacturers are struggling to keep up with the resurgence in vinyl records

Hard pressed: Resurgence in vinyl records

As the resurgence in vinyl records continues, manufacturers and their outdated machinery are struggling to keep up with the demand
Tony Jordan: 'I turned down the chance to research Charles Dickens for a TV series nine times ... then I found a kindred spirit'

A tale of two writers

Offered the chance to research Charles Dickens for a TV series, Tony Jordan turned it down. Nine times. The man behind EastEnders and Life on Mars didn’t feel right for the job. Finally, he gave in - and found an unexpected kindred spirit
Could a later start to the school day be the most useful educational reform of all?

Should pupils get a lie in?

Doctors want a later start to the school day so that pupils can sleep later. Not because teenagers are lazy, explains Simon Usborne - it's all down to their circadian rhythms
Prepare for Jewish jokes – as Jewish comedians get their own festival

Prepare for Jewish jokes...

... as Jewish comedians get their own festival
SJ Watson: 'I still can't quite believe that Before I Go to Sleep started in my head'

A dream come true for SJ Watson

Watson was working part time in the NHS when his debut novel, Before I Go to Sleep, became a bestseller. Now it's a Hollywood movie, too. Here he recalls the whirlwind journey from children’s ward to A-list film set
10 best cycling bags for commuters

10 best cycling bags for commuters

Gear up for next week’s National Cycle to Work day with one of these practical backpacks and messenger bags
Paul Scholes: Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United

Paul Scholes column

Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United
Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

Kate Bush shows a voice untroubled by time

A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Robot sheepdog technology could be used to save people from burning buildings

The science of herding is cracked

Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

This tyrant doesn’t rule

It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?