Sunday, 16 February 2014

Cutting too far too fast

In 2010 Conservatiev Chancellor of the Exchequer  George Osborne said that "The formal mandate we set is that the structural current deficit should be in balance in the final year of the five-year forecast period, which is 2015-16 in this Budget." But he was going to go even faster: to eliminate the structural deficit in 2014-15. "Or to put it another way, we are on track to have debt falling and a balanced structural current budget by the end of this Parliament."

The contrast with Labour, who lacked "a credible plan to reduce their record deficit" was inescapable.

Which makes what happened next rather awkward. Not only did the Chancellor miss his target spectacularly – the ambition has now been deferred to the next Parliament – but deficit reduction has been slower than under the Alistair Darling plan he denounced as a "reckless gamble".
Mr Osborne wanted the deficit down to £60 billion by 2013-14; Mr Darling's timid plan only reduced it to £85 billion by 2013-14. According to the OBR's last report, the actual deficit will be £120 billion – twice as bad as the Chancellor planned.

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