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By Peter Hoskin
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Only
five points? Didn’t the checklist
I prepared in advance of the Autumn Statement
contain ten? Well, yes, it
did – but many of those points still apply, and this isn’t meant to be exhaustive
anyway. This is more about what to look out for in the big print, rather
than what will be hidden in the small print. Here goes:

1. Oh yes,
the deficit.
That pre-Autumn Statement post was mostly about the debt: George
Osborne was set to break his fiscal rule to have the national debt growing no
faster than the economy by 2015, and it turned out he did break it. It’s still
worth keeping an eye on this, not least because the debt forecasts may slip
even further.

But
now it’s more about that which builds up the debt: government borrowing. We all
know how much emphasis George Osborne has placed on “getting the borrowing down”,
and he’s managed it thusfar – as the Tories like to point out, the deficit has
been reduced by a quarter since the Coalition took power. But now that record is
in peril. Persistently low growth, and the shuddering effect that has on tax
receipts, has meant that public sector net borrowing has been higher than
anticipated. And it’s got to the point where it could even be higher in this
fiscal year than it was in the last. The set of Office for Budget
Responsibility forecasts that accompanied the Autumn Statement had borrowing
falling between 2011-12 and 2012-13, but only just – from £121.6 billion in to
£120.3 billion – and that was predicated on a windfall from the 4G auction that
didn’t
materialise
. It will be a close-run thing.


The
Big Question is whether this will mean that Mr Osborne breaks his other fiscal
rule: to have the structural deficit – i.e. the part of the deficit that
persists when the economy is working as it should – down to naught within five
years. Again, he’s managed to meet this so far, but the timeframe keeps being
pushed back. Here’s the relevant graph (and here,
incidentally, is a post I wrote detailing both of the fiscal rules):

Graph 1

If
it is pushed back into a sixth year from now, then both of Mr Osborne’s fiscal
rules will have been broken – at least for the time being.

If
borrowing rises, or if a fiscal rule is broken, Ed Balls will be delighted to
the point of madness. Labour’s main fiscal problem is that, whatever they say, it’s
been calculated that they would have borrowed around £200 billion more in this
Parliament than the Coalition is set to. This problem will remain whatever the
figures reveal tomorrow, but Mr Balls will hope to confuse the issue by pointing
to rising year-on-year borrowing under Mr Osborne. “We’d borrow more, you’re
borrowing more – what’s the difference?” will be his implicit and misleading
message. And, as he made
explicit
at the weekend, he’ll try to argue that Labour’s borrowing would
deliver growth.

2. Growth
(or the lack of it).
Speaking of growth, what will the latest Office for Budget Responsibility
forecasts be? So far, they’ve been a case of diminishing returns: every time we
return to them, they seem to have diminished, as this graph shows:

Graph 2

And
this inglorious trend looks likely to continue tomorrow. The OBR’s growth
forecasts for the next few years are still more optimistic than those put
forward by other
soothsayers
. The papers are already reporting that they’ll be revised
downwards once again.

And
it’s not just annual growth: the OBR forecasts quarterly growth too, so we’ll
find out whether they think a triple-dip is more likely than not.

3. The size
of the envelope.
George Osborne has already strayed into the fog of the post-2015
future – the Autumn Statement, for instance, contained fiscal forecasts going
into 2017-18. But the Chancellor’s steps are going to become firmer tomorrow. As
he announced last week,
the Budget will reveal the ‘spending envelope’ that this summer’s Spending Review
will have to occupy.

Depending
on how much information is given, we’ll be able to use this to estimate how
much each government department will be cut by in 2015-16. In fact, the Institute
for Fiscal Studies already
did this
after the Autumn Statement. They figured that non-protected
departments could be whittled down by an average 3.2 per cent in the year
following the election, under Coalition plans.

These
IFS figures could be raised or lowered tomorrow, depending on everything from
forecasts for welfare spending to the level of debt interest. But it’s worth
remembering that they remain guesswork, not least because they make assumptions
about which departments will be spared from cuts, and other policy decisions.
We will only know for sure on 26th June.

4. The
A-word.
As
it was
with Cameron’s address to the Conservative spring forum, expect it
to be with George Osborne’s Budget speech: “aspiration” will come up a lot, whether
explicitly or implicitly. Today affords us a preview of this, with the launch
of a new
childcare voucher
for working families – but we can guess at some of the
other specifics, too. As the Sun suggested on
Sunday
, the Chancellor is likely to put affordable housing at the heart of
the Budget. He’ll probably also freeze fuel duty for this year. And, perhaps
most significant, he could at last raise the income tax threshold to £10,000,
the level that the Coalition Agreement aspired to. I touched on the politics of
this last one in a recent
post
.

5. Bricks
and mortar.
There will be homes, but will the construction industry be set on other
infrastructure projects, too? Mr Osborne increased infrastructure spending by £5
billion in the Autumn Statement, on the grounds that building means jobs means
growth. But there are plenty of calls, from Vince Cable to the CBI, for him to
go further this time around. And what if he does? The main question – besides
what sort of infrastructure – will be
how it’s funded. There is, as we know, not much cash swilling around, and some
of the policies listed above already look relatively pricey. Will the
Chancellor come up with some clever private finance scheme? Or will he do what Mr
Cable has recommended under
cover of an open question
in the New Statesman, and just borrow more money?
That would hardly be good for the deficit, but – returning to point 1 again –
if the fiscal rule is to be broken anyway, perhaps Mr Osborne will be of a
different mind now.

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