Not in great shape
What's black and white, and red all over?
Yes that's right - it's the books.
And now Cam has finally seen them, he's shocked. It turns out Brown/Darling made some preposterously optimistic assumptions on growth and debt interest:
“There were two levels of optimism in what the [Labour] government was forecasting. One was trampoline growth of 3% and above, and the second theory was that interest rates would always stay low.
One of the most shocking things is the extent of the interest we are paying on our debt. If we don’t do anything about it, it is going to be £50, £60, £70 billion.
It is going to be huge. We will be spending more on debt interest than we do on educating our children and defending our country. It is totally irresponsible what we are left with.”Who would have thunk the books would show that?
It would of course be churlish to point out that both of these "shocks" have been blogged to death on BOM for the last several years (eg see here). The main thing is that Cam is now fully seized*.
And now that he's on the case, he identifies some other old BOM favourites for cuts:
“You have to address the massive welfare bills. You have to address public sector pay bills. You have to address the size of the bureaucracy that has built up over the past decade.
Otherwise you will have to make reductions across the board which you don’t want to do. We need to address the areas where we have been living beyond our means.”As we've blogged many times, the public sector paybill and the welfare bill together comprise nearly 60% of total public spending - they have to be cut. And while Cam has already announced a partial public sector pay freeze for next year, it now sounds like he's going to extend it into the years beyond (as recommended by the TPA/IOD cuts paper here). Good.
So will George's budget avoid further tax rises?
Unfortunately, Cam still refuses to rule out a VAT rise, which now seems a virtual certainty. However, he is back peddling on the prospective CGT rise. Claiming he "did not come into politics to punish people who want to do the right thing and save”, he suggested there would be relief for those who hold assets for a long period (something like Brown's short-lived taper relief).
But whatever the specific decisions on tax and spend, there is one thing Cam and George absolutely must do - they must make absolutely certain the budget delivers the full package. Maybe not the final detail on what individual programmes each department will cut - that will come in the autumn spending review - but everything else must be there (including the so-called "spending envelope" for Departmental Expenditure Limits).
*Footnote Yes, we know - as Mrs T keeps saying, it's all very easy for Tyler to sit at his keyboard in his pyjamas tapping out tales of fiscal doom, but Cam has to take the country with him. Blaming the books may be the oldest formula in the, er, book, but like all fairy tales, it resonates with something deep in our collective soul. You can't really blame Cam for using it. Especially when he already looks terminally knackered.
PS BOM banned in Beijing. One of the junior Tylers has just returned form China, and reports that BOM is banned there. Which is very encouraging. Especially since Guido is not banned. (We've blogged China several times, and presumably we're banned for posts like this).