Labour's final Pre-Budget Report (PBR) was a real shocker. Key points:
- Borrowing - no action to cut borrowing faster than the leisurely pace set out in the April budget, and the Treasury forecasts rest on the ludicrously optimistic assumption that our GDP growth rate will soon return to 3.25% pa; the UK has been left as the developed world's borrowing basket case, and a catastrophic capital flight is that much closer.
- Tax - no action to cut taxes in order to boost growth; on the contrary, the tax on jobs (National Insurance) and other taxes will be increased by £5bn pa (2012-13); the tax on bonuses seems to be the worst of both worlds - given the City's imaginative tax lawyers, it definitely won't raise much revenue, yet it has sent a very negative message to those footlose international financiers.
- Spending - far from cutting spending, incredibily, the PBR increases it - by £5bn pa (2010-11); moreover, there is virtually no detail on how future expenditure restraint will be delivered - it's simply assumed that savings can be found somehow to provide for Labour's "ringfenced" areas (ie schools, hospitals and police)
But in reality of course, nobody expected Labour to deliver any sense in this PBR. As we've blogged many times, the financial markets and everyone else who matters wrote them off long ago. The real test will come when George stands up to deliver the real budget next June.
And if George gets it wrong, we really will have to get out.