Editorial: Osborne has little room for manoeuvre

The Chancellor's first priority must be to avoid the debacle of U-turns that took such a toll on his reputation last year

Share
Related Topics

It is against an unpropitious background that the Chancellor will present his Budget in one week’s time. Politically, his party is riven with insecurity and the spectre of Ukip is looming large. Economically, Britain is on the brink of a triple-dip recession, the triple-A credit rating is lost, and even optimists predict only slight improvements to come. The latest warnings about increasing numbers of children slipping below the poverty line only add to the pressure. Yet George Osborne has exceedingly limited room for manoeuvre.

Britain’s economic problems are far from simple. Turmoil in the eurozone is a very real drag on growth. The banking sector is still dysfunctional – pulled one way by the requirement to take fewer risks, and the other by demands to increase lending. Meanwhile, the rise of China et al is forcing a radical re-think of our global role. And, after the bursting of one of the largest credit bubbles in history, there is no alternative but a period of retrenchment. All of which adds up to a conundrum to which  neither the debt-funded Keynesianism of the left nor the tax-cutting fanaticism of the right is any answer.

Next week, the Chancellor will want to unveil some sweeteners easing the burden on long-suffering households – increasing the income tax threshold to £10,000, say, or cancelling impending increases in petrol duty. Both moves would be welcome. But Mr Osborne’s first priority must be to avoid the debacle of U-turns that took such a toll on his reputation last year. He must also resist the temptation to try to see off his critics with grand gestures. The Chancellor does not have growth within his gift, and he would do well not to imply otherwise.

That is not to say there is nothing Mr Osborne can do. Top of the list is infrastructure. The Coalition talks warmly of investment plans, but only a tiny fraction of projects have gone ahead. Pro-posals to encourage private money into public programmes are also making slow progress. And attempts to boost our house-building have had little impact. The Chancellor must use the Budget to turbo-charge such efforts, particularly as regards the bottlenecks in the housing sector. School-building slated for after 2015 should also be brought forward, and planning reforms must be expedited.

Mr Osborne is right to stick to his austerity plans. He is right, too, to have let them flex in response to Britain’s sluggish growth. But he must do more to ensure that public spending is focused on the most economically productive areas. That means putting an end to universal pensioner benefits. It also means looking again at the ring fences around some of Whitehall’s more inefficient budgets. For all the Prime Minister’s protestations that education, foreign aid and the NHS should be sacrosanct, there can be no justification for further cuts to welfare, say, while such distortions remain.

The Chancellor is widely expected to use the Budget to adjust the remit of the Bank of England, ahead of the new Governor’s arrival in July. There is certainly room for more innovation from Threadneedle Street. But monetary policy is no panacea. Indeed, Mr Osborne should pay as much attention to the troubles of the retail banking sector.

Lending is still sclerotic, particularly to smaller companies, putting a brake on growth and scuppering judicious efforts to boost exports to fast-growing, non-EU markets. The so-called “Funding for Lending” scheme set up to crack the problem has proved largely ineffective, though. Despite a slight rise in mortgages, business lending is still alarmingly low. It is time for a shake-up, then. Extending the initiative and setting a target for company loans are both decent options.

Tweaks to arcane loan strategies and guarantees for house-builders may lack the wow-factor of lavish spending pledges or swingeing tax cuts. But a Chancellor navigating the narrowest of courses would be wise to tread carefully.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Recruitment Genius: Junior Web Designer - Client Liaison

£6 per hour: Recruitment Genius: This is an exciting opportunity to join a gro...

Recruitment Genius: Service Delivery Manager

Negotiable: Recruitment Genius: A Service Delivery Manager is required to join...

Recruitment Genius: Massage Therapist / Sports Therapist

£12000 - £24000 per annum: Recruitment Genius: A opportunity has arisen for a ...

Ashdown Group: Practice Accountant - Bournemouth - £38,000

£32000 - £38000 per annum: Ashdown Group: A successful accountancy practice in...

Day In a Page

Read Next
 

Etch, a Sketch

Jane Merrick
 

Something wrong with the Conservative Party’s game plan

John Rentoul
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

How to make your own Easter egg

Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

Bill Granger's twist on Easter Sunday lunch

Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
Joe Marler: 'It's the way I think the game should be played'

Joe Marler: 'It's the way I think the game should be played'

The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

Cricket World Cup 2015

Has the success of the tournament spelt the end for Test matches?
The Last Word: Justin Gatlin knows the price of everything, the value of nothing

Michael Calvin's Last Word

Justin Gatlin knows the price of everything, the value of nothing