This week’s budget showed an element of ENRON-esque voodoo economics at play. Predictions from numerous bodies had suggested that the chancellor would be forced to concede that borrowing had gone up along with the deficit. But instead he suggested the government had miraculously managed to limbo under the bar.
However, a closer look at the budget figures suggested that inexplicably many government departments had simply stopped spending for the last few months before the budget. Normally you expect the opposite to happen – where departments spend like a sailor on shore leave just before the budget. This is especially true when you’ve got an axe wielding maniac cutting everything that moves loose in No. 11. As the last thing any minister wants to do is identify more money to be cut.
Indeed it is becoming clear that all sorts of tricks were pulled by the government to create the illusion of on course. Various payments to the EU or IMF were delayed till just after the budget (something that doesn’t look good normally, as it could lead to accusations of the UK being in a state of default by paying late). All told a whopping £11 Billion underspend was recorded with approximately £5 billion scheduled to be spent in the next few months.
All in all it looks like the government was playing a standard trick of market traders, where they will park funds overnight between tax years in an appropriate account offshore and thus avoid a big whack of tax. It was also a favourite tactic of ENRON to push payments (money out the door) long into the future, but book future profits (i.e. money that would theoretically come in the door at some ill defined future date) immediately on the balance sheet. This meant that the economic numbers for the company always look great….until someone added up all those debts!
One gets the impression that sometime around Christmas it dawned on Osborne that he was going to overshoot his own figures by a significant margin. Consequently he and his sidekick Danny Dire, with one assumes the PM’s permission, when door to door between government departments and basically shook down ministers like a pair of back alley loan sharks, scaring them into delaying payments (this would explain the panic heard over the last few weeks as various departments sought to defend their budget) and pulling all sorts of creative accounting tricks to make the budget look more rosy – or more to the point, slightly less gloomy!
And for good reason, because as it was the budget wasn’t that upbeat. It more or less confirmed what we already know the austerity measures are increasing the deficit. Indeed the tax cuts in beer and fuel duty announced will hardly help the government’s finances (while I drink and drive (not at the same time mind!) I don’t want the government going bankrupt allowing me to do so!), nor will this home buying scheme (which I would argue misses the mark, first time buyers like me aren’t buying because many people are afraid of loosing their jobs in the next round of cuts and being stuck with a mortgage!). While at first glance it wasn’t quite the rich man’s budget of last year (e.g. no pastie tax). But hidden within the fine print, it was more of the same.
Had that -£11 Billion appeared on the balance sheet tho, then one assumes that Ed Miliband’s response would have been to get up, pull out a pack of cards and stand in silence playing solitaire from the dispatches box. When the speaker inquired what he was doing he would have replied that he was now so confident of winning the next election that he saw no reason to dignify Osbornes statement with a reply. And in lieu of the fact that the government had just wasted several years of Parliamentary time pursuing this policy of austerity, he felt entitled to waste thirty minutes of Parliament’s time playing cards.
In short we say a budget that may as well have been concocted by Hogwarts school of Magic and Wizardry than any real life economics. It simply demonstrates the desperate lengths the government is going to in an effort to hide the fact (badly!) that their policies has put the economy into a tailspin.