George Osborne promised to eliminate the deficit by 2015.
In 2010 he said that the government's aim was for the deficit to be eliminated by 2015. While an aim isn't a promise, the government's performance on the deficit has been worse than was aimed for.
"Five years ago, the newly elected chancellor and the prime minister came to this house… we were promised, specifically by this chancellor, that by today, the deficit would be eliminated, and debt would be under control and falling dramatically. People put their trust in that commitment."
John McDonnell, Shadow Chancellor, 25 November 2015
Amidst the political theatre yesterday afternoon there was also a significant set of announcements on government spending.
Dire warnings of the effects of cuts to police numbers and cuts to tax credits had loomed over today's Autumn Statement. By the time George Osborne had finished speaking, he had instead cut these cuts from the government's agenda.
But he was accused by the Shadow Chancellor of breaking a promise to eliminate the deficit by this year. Mr Osborne didn't explicitly promise to rid the country of the deficit completely by this year, although he stated an 'aim' to do so, and in his first budget he said that aim would be achieved (based on the forecasts of the time). That didn't happen.
The Chancellor didn't promise to eliminate the deficit, but he didn't meet his targets
When we contacted Mr McDonnell's office, they directed us to an exchange between Mr Osborne and the then-Shadow-Chancellor, Alan Johnson.
"…Will the Chancellor confirm that the aim continues to be that the deficit will be eliminated by 2015?"
"First, I should welcome the right hon. Gentleman to his new role on behalf of all Government Members. I did the job for five years, and I hope that he does it for even longer than I did. The answer to his question is yes."
George Osborne, 12 October 2010
At the risk of playing semantic games, an aim is not a promise. It's one thing to set a target and it's another to pledge that the target will be met.
That said, Mr Osborne did celebrate forecasts showing that the government was on course to eliminate the deficit on a number of occasions. In his very first budget, he showed forecasts predicting a surplus on the 'structural current budget' in 2014/15. This is the difference between government spending and income, not including new investment in assets like roads and buildings, and is adjusted to take into account the state of the economy.
Things didn't work out like that. By November in 2011, the first surplus was forecast for 2016/17. By December 2013, it had been pushed back again to 2017/18, where it remains.
Our first overall surplus—so including investment and not adjusting for the state of the economy—is going to wait until 2019/20. For now.
Some cuts were avoided yesterday because forecasts changed again
Yesterday Mr Osborne was able to avoid predicted cuts because new forecasts from the Office for Budget Responsibility (OBR) showed that government borrowing over the rest of this parliament is expected to be £27 billion lower over the next 5 years than its July forecast had predicted.
This improvement has mostly been driven by higher than expected revenues. Taxes like corporation tax and VAT are predicted to bring in more money for the exchequer than was previously thought, particularly in the middle of the next 5 year period. Towards the end of that forecast, slower predicted growth stalls the improvement.
These forecasts could also change
The OBR's forecasts aren't infallible; the fact that there's been a £27 billion improvement in their predictions for government borrowing since the Summer Budget shows that.
And in all fairness, the OBR themselves acknowledge this. As they put it, looking at their past forecast errors then if their predictions this time are as accurate as they've previously been, then Mr Osborne has a roughly 55% chance of reaching a balanced budget (or a surplus) in 2019/20. His manifesto commitment was to achieve a surplus in 2018/19.
There are a number of reasons things could get blown off course. A slightly larger "output gap"—that is, an economy operating a bit below potential—could wipe out Mr Osborne's predicted surplus, as could a number of other things (higher interest rates, lower prices, lower than delivered plans, an unpleasant 'shock' to growth).
Isn't it nice to have the whole picture?
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