Budget: counting the deficit

In a nutshell: we have a £5bn tax cut right now. A boom, Then a £5bn tax rise.

Massive deficits in the coming three years of half a trillion pounds. BUT even those rely on a remarkable boom in 2011. Look at the chart below to get an idea of the likely size of the deficit in comparison to those since the Second World War (click to see a larger version):

Source: IFS, updated by Channel 4 News to include projections from today’s budget.

National debt is set to peak at 79 per cent of GDP. Only last year the budget assumed a “ceiling” of 40 per cent on national debt that had been kept to for a decade. That is totally obliterated in a year.

Page 38 of the Red Book says current spending will grow by an average of 0.7 per cent a year between
2011-12 and 2013-14 in real terms. So far under the Labour the growth rate has been 3.2 per cent.

That means that the chancellor is planning public spending growth lower than in the Thatcher era.

So what happens if the Great Boom of 2011 doesn’t happen? Do the public finances unravel? Or is that the problem of George Osborne?

I’d love to know what’s going on in George Osborne’s head. On the one hand he could hope to be a shoo-in for Number 11 in the next 11 months. But the chancellor has effectively tied his hands for most of a likely Conservative first term.