‘Plan B’ is not the answer

Is George Osborne’s plan working? You can see why his enemies are circling. If you take his own definition – his ‘fiscal rule’ that the debt/GDP ratio should be falling by the end of the Parliament – then no. But this is mainly because Osborne has been flexible – some would argue too flexible – following the eurozone crisis and high commodity prices, which have hampered growth prospects through weaker-than-expected net trade and higher than expected inflation (see the OBR yesterday).

Last autumn, the Chancellor had a choice between more cuts or more debt. He chose more debt, and stuck to his old spending plans knowing that the growth (and tax revenues) would not be as he had hoped. He chose to abandon a ‘deficit reduction’ policy, in favour of a ‘sticking to spending plans’ policy. That’s why his so-called ‘sado austerity’ will add over £605 billion to the national debt by 2014/15, with no balanced budget in sight until well into the next Parliament.