Geoffrey Howe, the UK’s greatest post-war Chancellor, imposed eye-wateringly harsh measures in a dull monotone. He gave us an anaesthetic before starting in with the scalpel, so the pain was not apparent until much later. This is not George Osborne’s style. His approach is to batter us about the head with a grim analysis of how dire things are, warn us of hard times ahead, and then take a leaf from the book of Brownian motion.

Look, he might as well have said, I’ve got all these eye-catching initatives, some of which are worth over a billion pounds! As he didn’t say, this government is spending £2 billion every day (including Sundays and Bank Holidays) so £1 billion is a rounding error in the national accounts. The stuff about nursery education, academies, employment incentives for unemployed youngsters, science projects, enterprise zones, business finance partnerships and the rest is all very fine, but it hardly moves the dial in terms of revitalising a £2 trillion economy.

As for the help to heavy electricity users, this could be a cruel joke. British energy prices are among the highest in the world, the legacy of Labour’s pig-headed determination to go green at any cost. It’s a moot point whether the coalition will be able to drag the Lib-Dems into seeing sense before the lights go out. Until then, the big users are to be offered subsidies to offset the cost of the subsidies for solar panels and wind farms.

The UK economy is in a pitiful state, but the savage cuts amount to about 4% of government spending – that’s 4% over the next three years, not 4% a year. It still eats half the economy. Unsurprisingly, growth has almost stopped. The OBR’s forecasts for this year and next look plausible, but those for the years beyond have been sprinkled with Treasury fairy dust to produce a vision of broad sunlit uplands, bathed in the healthy glow of a shrinking Budget deficit, just a few years away. There is no convincing reason to believe them this time, either. The pressure on government to spend is not going to lessen; in three years’ time it will be intense, as the next election looms.

There are some good things in the statement. Postponing the increase in petrol duty makes sense, even if the pledge to water down next August’s planned rise smacks of the need for a positive headline now. If the actions match the words on releasing tiny businesses from the clammy embrace of the employment laws, that would have more impact on youth unemployment than all today’s little measures put together. Alas, we’re only at the “consultation” stage.

State spending on high-speed mobile internet is as vital as state spending on better roads; this technology has reached the equivalent of the Model-T Ford, and will eventually have as much impact on everyone’s lives as the motor car. Osborne could well be right when he says spending money to extend mobile broadband to almost everyone “will help create a living, economically vibrant countryside.”

Britain also appears to be “safe from the debt storm” sweeping Europe, at least for now. This is no mean achievement. Even if it looks as much like luck as judgement, the Chancellor might as well take the credit for it, and some of his wheezes designed to encourage schemes which exploit the low cost of debt to the UK government are worth trying.

Eventually, these supply-side moves will generate some growth. But the deadweight of state spending, both past and present, will remain. We have promised ourselves benefits that we cannot afford and borrowed to pay for them. Tim Morgan at Tullett Prebon has pointed this out with ghastly clarity in his recent papers. So far in this crisis, only those who have either lost their jobs or failed to find one in the first place have really suffered. There is little here to suggest that those sunny uplands are more than just a mirage.

Do not be so sad and glum

There’s bound to be far worse to come.

Advertisements