Economy

Oh look, Gordon Brown has continured his return to public life with a sizeable interview in today's Independent.  It's a generous portrait which seems designed to dispel any rumours about the former Prime Minister's wellbeing. Apparently, he "looks healthy and fit … seems quite cheerful." And we're treated to descriptions of his face, "like a map of a man's soul." For those who can read any further, there are accounts of his constituency work and his aspirations to "do more on international development". The world shudders. Despite his claims to the contrary, there are ominous signs that Brown is keen to impact upon our national politics.

Alistair Darling has been on Sky News doing a lap of honour for today’s GDP growth figures. “Vindicates everything we did,” he said - his narrative being that the extra debt did indeed boost the economy and produced 1.1 percent growth in this quarter. This chimes with what I wrote in the Daily Telegraph a few weeks ago: that the economy is better, not worse, than the Tories thought. Even if, or should I say when, the ONS say the figure was wrong and needs to be revised downwards it will still mean tax revenue churning in at a far faster rate than thought. This will give Osborne a get-out clause if he wants to go softer on the cuts, or the tax rises (any adjustment would have to be consistent with his 80/20 split between cuts and taxes).

George Osborne has talked of simplifying the tax system for years, and today he launched the OTS, The Office for Tax Simplification. The OTS will be chaired by Michael Jack, s Treasury minister in the Major government, and John Whiting of PWC and Chartered Institute of Taxation. The OTS looks suspiciously like a quango, but some public bodies are necessary and welcome. The tax system is unintelligible, and, needless to say, Gordon Brown complicated it further with morass of stealth taxes, tax credits and new loopholes opened more by chance than design. This has particularly affected small businesses and the OTS will identify salient businesses taxes and recommend their simplification. That can only assist hard-pressed small businesses.

Most of Tim Yeo’s proselytising on climate change must be resisted. He calls for a dramatic reduction in carbon emissions in the short-term, which would paralyse Britain’s already geriatric economic competitiveness. He also endorses a policy that would push consumer energy prices to punitive levels in the hope that their behaviour is moderated. And he is adamant that David Cameron’s Husky photo-op was the last word in political positioning. But, his central point, one shared with John Redwood and Peter Lilley, is unanswerable: ‘Working towards a low carbon economy is not a “luxury”; it is essential to our future prosperity.

Given that the Labour leadership campaign is so dull, we should thank Chuka Umunna for cheering us up with his comedy economic analysis. Now on the Treasury Select Committee, he has regaled us with an ‘Open letter to George Osborne' where he makes many entertaining points. It’s worth looking at, because it sums up a few errors swirling around the Labour benches.   1)   During our exchange, you insisted your budget was "progressive"… you stood by your decision to apply a 10 percent cut to the housing benefit of those who have been on JSA for more than 12 months. Osborne has to use words like “progressive" to assuage the LibDems, but by their definition he is right.

Pat McFadden, the sullen-looking Shadow Business Secretary, has given an important speech to the Fabian Society. He said: ‘Fight the cuts is a tempting slogan in opposition, and there are indeed some that must be fought. But if that is all we are saying the conclusion will be drawn that we are wishing the problem away.' He is the first shadow minister to recognise that Labour’s current approach is counter-productive, and Ed Balls’ philosophy is suicidal. He notes: ‘In fact, that is the position the Tories and the Lib Dems would prefer us to adopt. They want Labour to retreat to its comfort zone and allow them to say that they alone are capable of facing up to Britain's problems.

Much ado about the Office for Budget Responsibility's growth predictions in the Treasury Select Committee earlier, especially as an OBR official admitted that the cuts and tax hikes in the Budget could conceivably tip us into a double-dip recession. So are the OBR's official forecasts too optimistic, as some are now claiming? Only time will tell, but we can get a decent sense of things by comparing them with the independent forecasts that the Treasury collect here. And this is the result: In other words, the OBR growth forecasts stick pretty closely to the average independent forecast, although they are a touch more optimistic. Admittedly, these independent forecasts were collected before the Budget (but after the election), so they may be tweaked in a month or two.

To understand the budget properly, read James Forsyth's cover story in The Spectator today. Sure, it was about reducing the deficit - but within it lie several political strategies which explain how George Osborne hopes to win a majority Conservative government. James says that those around Cameron will not entertain this notion - they "have been persuading themselves that coalition government is the best possible result". But Osborne, he says, finds it deeply unsatisfactory and has a twin mission: fix the economy, and win outright next time. "He has been observing recently that Gordon Brown spent 13 years successfully creating Labour voters — mainly through state dependency — and that the Tories need to reverse this process if they are to win.

This is a slow-burning budget. Not because Osborne has concealed, like Gordon Brown did, but because the reverse is true. The budget is, as Osborne says, a third of the size but with three times the amount of information. It has layers: some policies and language are there just to assuage the LibDems. Some are pure Tory. James has a brilliant cover piece in tomorrow’s magazine which spells out the political, rather than economic, forces at work in this budget. Osborne, that great player of three-dimensional chess, sees in this budget plans to restore a Tory majority government. The Red Book itself is, for wonks like myself, a joy to read: straight figures, with nothing concealed.