Upon entering office, Osborne said he wanted the UK’s AAA credit rating to act as a ‘benchmark’ for his performance as Chancellor. Compared to Osborne, Chief Secretary to the Treasury Danny Alexander at the time described the credit rating as ‘not the be all and end all’. Moody’s downgrade of the UK’s credit rating to AA1 and many other services comes at a painful time for the Chancellor, for whom the Spring budget will be crucial in appeasing backbenchers and fellow ministers already looking around for a replacement.
Following 2 years of u-turns and delays, with 70% of budget cuts yet to come into force yet, Osborne is reluctant to make another u-turn on the governments economic plans. Promising ‘we won’t change course’ Osborne seemed out in the cold among his Tory peers until Cameron came to his semi-rescue responding that the credit rating demonstrated that ‘we have to go further and faster on reducing the deficit’.
However, recent discussions on the 2015-16 budget proposals have highlighted frosty relationships in the cabinet as Cable, May and Hammond among others argue with Osborne over his proposals. The estimated £448m cut to the Home Office is equivalent to 9,800 police officers and the proposed £1.4bn cut to local government many argue will eventually lead to councils only being able to provide services they are legally required to.
As the ONS confirmed its figures for 2012 Q4 it was a reminder for the Chancellor of targets missed. The 2011 budget forecast that investment would be +2.9% while instead it was -0.6%. Furthermore as Osborne planned to ‘rebalance the economy away from a reliance on government and household spending’ it was projected that household consumption would decrease 1.7% while instead it rose 1.8%.
Another sad story for Osborne this week were the results of his high tech enterprise zones. 24 zones promised to create 30,000 jobs by the end of parliament however after a year of being set up, only 1,700 jobs have been created and some zones have barely any tenants.
Looking forward, Osborne in meetings with backbenchers was warned several times not to repeat the ‘omnishambles’ of the last budget and after coming under fire for making each budget a different fiscal plan creating uncertainty in the economy, it’ll be interesting to see what the Chancellor proposes on 20th March.