Allister Heath

He has been desperately trying to persuade us that things could be worse, but the truth is that this week’s news is a bitter blow for George Osborne. He has been desperately trying to persuade us that things could be worse, but the truth is that this week’s news is a bitter blow for George Osborne. Our economy only grew by 0.2 per cent this quarter, at a time when he desperately needs stronger growth to generate the tax required to finance public spending and reduce his awful budget deficit. Our chancellor may seem nonchalant but, as he knows, this pitiful growth means less money for the exchequer, and the prospect that Britain will be stuck in a permanent state of semi-stagnation. The coalition government has seemed weirdly insulated from the bleak reality.

It isn’t spending cuts Those arguing against spending cuts have recently adopted a one-word argument: Ireland. The case it stands for is as simple as it is bogus. Ireland had a deficit, now even worse than Britain’s. It adopted an agenda of sharp public spending cuts, on the same logic used by the British government. The result? A double-dip recession and a fresh round of misery. The lesson from Ireland is that cuts don’t work — and that George Osborne is leading Britain into the swamp. The argument is seductive, but only if one is ignorant about what has just happened in Ireland.

As valedictory Budget statements go, this one did not disappoint. Alistair Darling may lack Gordon Brown’s verbal chutzpah, but he made full use of Labour’s arsenal of debt and tax concealment tricks, all of which have been carefully honed by this government since 1997. The most important points were buried in the fine print, missing altogether or assumed away thanks to growth and revenue forecasts so optimistic that they would have made even Lehman Brothers’ accountants blush. The central ‘achievement’ of this Budget — that the deficit this year will be £167 billion rather than £178 billion — is something which any self-respecting Chancellor should be deeply ashamed about. This sum still represents an overspend of 11.

There was much that was absurd about Wednesday’s pre-Budget Report, from Alistair Darling’s failure to outline a realistic plan to prevent Britain’s national debt from exploding, to his risibly over-optimistic long-term growth forecasts. Public spending will jump again next year, we’re told. Schools, hospitals and police will be protected from cuts if Labour wins the election — which, plainly, it has not the slightest expectation of doing. This was about political positioning, banker-bashing, with a new bonus tax, and pretending to the electorate that a few efficiency savings and National Insurance tweaks will be enough to rescue Britain. The intention was to deceive voters, with the pain only kicking in after the election.

Allister Heath says that Brown’s poll tax on Britain’s 114,000 non-domiciled residents will drive away talent when our economy most needs it. Shame the Tories would do the same You would have thought that with the economy weakening, the stock market sliding, house prices tanking and Northern Rock’s botched rescue a daily humiliation, Gordon Brown would be doing all in his powers to help the City of London weather the gathering storm. Instead, he appears intent on making life even more difficult for it. His reckless plan to crack down on Britain’s 114,000 non-domiciled residents, including many of the City’s most important financiers, will be the most damaging in a long list of spectacularly ill-timed tax hikes due this year.

Allister Heath forecasts that Britain’s economy will suffer less than America’s, but that homeowners and consumers will still feel the pain — and blame it on Gordon Brown First, the good news: there will be no recession next year in Britain. But while avoiding ‘the Big R’ will be some cause for celebration, the overall outlook for 2008 remains bleak. The economy will not shrink but it won’t grow by much either. And there will be plenty of pain to go round. House prices will fall noticeably, which means that most members of the property-owning majority will become poorer — the first drop in wealth levels in more than a decade.