The Osborne tricks in the locker to hit the magic number include £3.5 billion in as yet unidentified spending cuts, a raid on departments by raising public sector contributions — in effect £2 billion in extra cuts — and bringing forward planned capital spending to earlier years.
Corporation tax reforms have been deferred to 2019/20 to give firms “more time to prepare”, giving him the desired surplus. It adds up to a shameless manipulation of spending cuts and deferred receipts to preserve an arbitrary political target.
We’re also being asked to believe that these savage cuts will be under way in the year before a general election, which Osborne hopes to lead the Conservatives into. Tell me another.
After another “false dawn”, the OBR is acknowledging the reality of a world where we’re having to put in more effort and labour to produce stuff — and that feeds through to everything that matters; corporate profits are lower and so we can’t afford higher wages. No amount of shilly-shallying with the numbers can evade that.
The even more worrying thing in the depths of the watchdog’s big blue book is that there could be more productivity pain to come: the OBR is pencilling in productivity growth of 1.8% a year between now and 2020, but points out that this is more than twice as high as the 0.8% a year seen on average over the past three years.
And if the Government hits its stated ambition of reducing immigration to the tens of thousands, the OBR says the surplus disappears completely as migrants boost the working population and hence growth.
The question for the Chancellor now is when, rather than if, he admits failure on this surplus target — or hands a hospital pass to his successor.
