Sunday, June 3, 2012

Cameron: budget errors left government 'ploughing into brick wall'

Back in mid-March, just days before his vital Budget, George Osborne was so confident of it being a success that he took himself to America to join David Cameron at a White House dinner. A chancellor with a Budget to finalise traditionally spends the week before it cloistered with his senior officials, burning the midnight oil at his desk in the Treasury on Whitehall.

“I wasn’t surprised he went to Washington,” says one of the Chancellor’s Labour opponents, who has studied him closely. “George Osborne is such a political junkie that there was no way he would be able to resist the glamour of hanging out with Obama when he should have been concentrating on getting his Budget right.”

At the time, those who questioned the wisdom of Mr Osborne’s trip were told to calm down. Relax, it will all be perfectly fine, said the Chancellor’s supporters. Many of the biggest decisions couldn’t be taken until the last minute, after consultation with the Liberal Democrats, when Mr Osborne was back from Washington. Understand, said the Osbornites, that Coalition budgets are different from budgets in which one party is in charge.

The Chancellor’s Budget was certainly different. More than six weeks on, the Government is still struggling to clear up the mess. One wit joked last week that the next Budget should be written in pencil, so that it is easier to rub out afterwards. What was supposed to be an upbeat “package for growth” has destroyed Mr Osborne’s carefully cultivated reputation as his party’s master strategist. The Chancellor today is a diminished figure trying to figure out a way to get back on track.

The measures "at the heart of the budget" remained in place, he said – lifting the threshold at which people start to pay income tax and cutting the top rate of tax from 50p to 45p.

It has been reported on the ConservativeHome website that Osborne, as the Guardian reported before the budget, wanted to cut the top rate of tax down to 40p but was blocked in the final negotiations by Cameron and the deputy prime minister, Nick Clegg. Osborne had intended to say the government would cut the top rate to 40p by the end of the parliament.

Some of the current tensions between No 10 and 11 flow from the dispute, even though those tensions are mild compared with similar rows in the Labour era.

But the Mail on Sunday has reported that Osborne's parliamentary aide, Sajid Javid, warned him him that the budget, including the granny tax, would be a disaster. Osborne had told him it was too late to change anything.

A Conservative MP writing on condition of anonymity in the same paper accused Osborne of being a part-time chancellor with little grasp of the detail. The author also claimed that Osborne's supporters in parliament were alienating colleagues by acting as his "narks" (informants).

The anonymous MP writes: "It is completely wrong for whips to be answerable to a particular minister, instead of the prime minister. But that is 'Gideon's Gang' for you. His prospects of succeeding Cameron are receding fast: shares in Osborne have fallen through the floor."

Some form of capital spending package is being prepared by the Treasury either in the form of Treasury guarantees for spending backed by pension funds or a straight capital spending programme. The Bank of England may sanction a further round of quantitative easing this week if service sector figures slide further this week.

A YouGov poll for the Sunday Times found only 18% think Osborne is doing a good job while 58% think he is doing a bad job. That compares with a 34%/60% rating for Cameron. The public is evenly divided on whether the U-turns show a listening or incompetent government.

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