19 Mar 2014

Budget 2014: Carney butts in on a day of surprises

This is George Osborne’s big chance. It is the first time he will hold up the budget box at a time of a robustly growing economy. It has been a four-year wait for this pleasure.

Not just growth of around 3 per cent annually, but falling unemployment, rising employment and falling inflation. And yes, a pronouncement that the UK will shortly have reversed all the economic crisis contraction.


Yet still, as the opposition clings to, that growth is yet to feed in to living standards and a feel good factor. The treasury pre-released an heroic analysis this week saying that living standards were in fact going up – when you excluded everyone who had lost out.

In political terms the polls remain in Labour’s favour, just 14 months before the election. I have no doubt that the chancellor will deliver an eye-catching tax cut designed to change the political weather.

Unusually, none of this budget has been leaked. The chancellor is acutely aware of the impact of leaks and surprise, particularly so since his disastrous budget two years ago.

‘Signs of excess’

But euphoria would be very premature. The government has failed to deliver its long promised rebalancing of the economy. In fact, the chancellor is now trying to make a virtue of this, saying he is the man to get Britain exporting, having presided over a further imbalancing of the economy.

Enter Mark Carney last night, warning of “signs of excess” returning, and that “it doesn’t take a genius” to see the same risks as existed in the low rate environment a decade ago.

So why extend phase one of Help to Buy, as the chancellor will confirm today? The governor did not answer my question, but its clear there are some reservations about aspects of the wider Help to Buy policy.

More generally, there is a body of opinion in financial markets that the UK could yet become the slippery sixth member of the ‘Fragile Five’ emerging economies. The record current account deficit is the main risk or “contagion filter” as central bankers call it.

If doubts about the flavour, balance and sustainability of the UK recovery increase, then economic overconfidence today could end up looking rather silly – though right now that is a minority opinion. The treasury would marshal such fears as yet another rationale to maintain austerity.

There’ll be good news today. There’ll be a lot of politics. But we are not out of the woods yet.

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9 reader comments

  1. David Preston says:

    We are a very long way from recovery still; the little that has improved has simply widened the gap between regions and have’s have not’s. HS2 is lauded as being good for the North or should I say Manchester! Bunkum its only good for the City wallers who have depleted this country of manufacturing.In the North East all the talk is of high end job opportunities; that’s nice for those who have been able to get a good education, but nothing for the many unemployed who are not capable of doing so yet still need a decent job. The main reason of course is that those jobs were sent abroad to cheaper labour forces and the well off and elite could care less about our own people, profit comes first. No one trusts the figures put out by Government or opposition as they bend them to meet their needs; MP’s no longer represent the people who elect them they represent their party who represent the City. That’s why people no longer vote in numbers at National or Local elections. As for the recovery it’s as fake as the numbers they put out and the ideology behind their policies.

    1. Andrew Dundas says:

      “Not voting at elections …”

      David, how nice to hear from you! Why have pensioners like me been handsomely rewarded for voting? Are you aware that more than half of all electors are aged over 50 – and almost all who’re retired. Have you ever considered why do we do this when your age group don’t?

      I’ll let you know:

      1. My NI pension goes up in April to £180.60 per week: that’s ahead of inflation. It’s pensioners’ reward from politicians for voting for any of them, and

      2. A residual feeling that voting, whilst imperfect, is an hard-won right that we should sustain. It’s not a good system. Except in comparison with every other that’s been tried.

      As you’ll have noticed, yesterday’s budget was all about rewarding pensioners – and so-to-be pensioners – with changes they may welcome. As you and your pals eschew voting, you simply support the hand-outs of your tax money to us pensioners. If you don’t like that, try ensuring your name and your pals’ names are ticked off on the voting register at every election. Politicians see those registers, and the opinion polls that also record who votes, and make rational decisions using that data. You saw a good example of that self-interest on display yesterday.

      1. David Preston says:

        Andrew, I’m 59 and have voted all my life, my reward was a £1 increase in my benefit and being called a burden due to my Heart disease, Diabetes,chronic neck & back problems, glaucoma and more ; I don’t eschew not voting I’m simply stating the facts about the state of politics in this country and the corruption around it. I was a Conservative party member a long time ago and soon realised that the people were not the most important item on the party agenda’s; and the years I have spent as a community volunteer has shown me that the other parties are no better. As for rewarding pensioners what’s new, politicians have been rewarding pensioners for a long time now; ignoring the damage generations of fully employed workers did to the prospects of the younger generations in the 60’s & 70’s leading to manufacturing jobs being sent abroad and the collapse of the apprentice training that used to be paid for by the employers not the taxman.

      2. Andrew Dundas says:

        You should be urging everyone to vote. Not the reverse.

        As for democracy, hardly anyone gets the policy programme they voted for. But it’s far better than, say, a Putin demagoguery.

        Nor does proportional representation help: that ends up with minority parties holding the balance of power.

        Voting is our only protection however feeble.

  2. Mike Harland says:

    Oh dear, some of you economic journalists really should get out more. The UK is looking very much like Europe right now, with London untouched by any austerity and rebuilding its bubble, while we out here in the ClubPeriphery are surrounded by shops closing, nobody spending or going out, and even the lower middle classes living off foodbanks.
    The young still have no real or longer-term jobs and pensioners like myself are watching our savings dwindling as we work to support our offspring.
    With a huge trade deficit this last quarter, the current economy is built on a temporary consumer spending blip and the service industry (Casino economy) of the South East.
    What this week told me is that I will be dead before any HS2/3/4/ makes it past Manchester to improve things on the margins, no matter what our Chinese saviours promise.

    PS: can you stop calling places like Leeds the “North” there are still another couple of hundred miles of the UK beyond that, so let’s get a better relative perspective on the map of the realm!

    1. Philip says:

      Complementary to Philip Edwards’s view that London & the SE is a sink of iniquity, there’s a commonly-held view in this part of the world that the North starts at Potters’ Bar. As a Midlander, I entirely sympathise with your view. Indeed, if we sought to understand more, we’d often realise that we have more in common than sets us apart….and that includes UKIP & the BNP in the NW, Mr Edwards!

    2. Andrew Dundas says:

      Good point.
      However. It’s 487 miles to Thurso from Leeds. And much more than that to Lerwick on Shetland.
      Those long distances are quite a sensitive matter this year.

  3. Philip Edwards says:


    “So why extend phase one of Help to Buy……?”?

    How on Earth do you think all those entrepreneurs and “creators of wealth” are going to make money on the backs of ludicrously overpriced houses?

    The tories are just the boys to shovel national wealth into the trouser pockets of their construction chums. It’s what they do.

    But of course “Help to Buy” isn’t a capitalist subsidy is it?……………….Well, is it?

    In this case, the Plastic Yank Carney’s only function is to say, “Look Georgy Boy, don’t make it too obvious or they might twig what a giant ponzi the whole mortgage scam is.”

    They should name that so-called “new garden city” “Suckersville.” It could even become one of those interminably tedious south east soap operas where everyone reads the Sun and Daily Mail and joins the BNP or UKIP.

  4. robert black says:

    Re: Osbornes hilarious performance in New York before the IMF. Well done Faisal for summarily dismissing his deluded blatherings as the juvenile claptrap that they are. Pity Channel 4 cannot seem to do this more often. We reckoned you”re off to work for Murdoch and you”re demob happy?

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