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Did the chancellor mislead the public, and her own cabinet, before the budget?
It’s a good question, and we’ll come to it in a second, but let’s begin with an even bigger one: is the prime minister continuing to mislead the public over the budget?
The details are a bit complex but ultimately this all comes back to a rather simple question: why did the government raise taxes in last week’s budget? To judge from the prime minister’s responses at a news conference just this morning, you might have judged that the answer is: “because we had to”.
“There was an OBR productivity review,” he explained to one journalist. “The result of that was there was £16bn less than we might otherwise have had. That’s a difficult starting point for any budget.”
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Time and time again throughout the news conference, he repeated the same point: the Office for Budget Responsibility had revised its forecasts for the UK economy and the upshot of that was that the government had a £16bn hole in its accounts. Keep that figure in your head for a bit, because it’s not without significance.
But for the time being, let’s take a step back and recall that budgets are mostly about the difference between two numbers: revenues and expenditure; tax and spending. This government has set itself a fiscal rule – that it needs, within a few years, to ensure that, after netting out investment, the tax bar needs to be higher than the spending bar.
At the time of the last budget, taxes were indeed higher than current spending, once the economic cycle is taken account of or, to put it in economists’ language, there was a surplus in the cyclically adjusted…
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