Baby Ace: ALEX BRUMMER: Chancellor George Osborne will boast of "Britain"s economic recovery" during budget, as output grows at 3%

Friday, March 14, 2014

ALEX BRUMMER: Chancellor George Osborne will boast of "Britain"s economic recovery" during budget, as output grows at 3%

By

Alex Brummer

For the first time since he arrived at the Treasury, George Osborne has good news to deliver in his Budget speech.

Britain’s recovery finally looks to be well entrenched with output growing at or around 3 per cent.

Sometime later this year the Great Recession can be consigned to the scrapheap when gross domestic product returns to pre-slump levels.

Economic plans: Osborne will find it hard to resist an

Economic plans: Osborne will find it hard to resist an ‘I told you so’ moment now that the UK is the fastest growing economy in the G7

The Chancellor will find it hard to resist an ‘I told you so’ moment now that the UK is the fastest growing economy in the G7.

The return to business as usual has been achieved on the back of interest rates at 0.5 per cent for five years, quantitative easing of £375billion and a relatively mild fiscal squeeze.

Despite all the fuss about cuts and public spending, the UK is still borrowing around £100billion a year and debt levels are about 80 per cent. Britain’s cuts are modest compared to those across much of Europe and the reduction in spending delivered by sequester in the US.

Osborne might have hoped to go to the Dispatch Box on Wednesday, the last significant Budget before the General Election, with enough in his back pocket to deliver on his simpler and lower taxes agenda.

All indications are that the recovery in tax receipts has been disappointing with the exception of stamp duties, running at £20billion this year largely as result of the levies on rich people’s properties.

The improvement in the public finances since December is marginal.

As this paper reports today, Osborne will try to provide some support to savers for retirement by letting them keep the small pension pots, accumulated all over the place, rather than forcing them to buy expensive annuity products.

This is something our colleagues on Money Mail have been campaigning for.

Agreeably, he is also likely to extend emergency allowances for smaller businesses – offering £250,000 of tax-free investment beyond the current January 1 2015 cut-off date.

Business investment is a lagging economic indicator in the cycle and the Chancellor will hope that this measure injects some thrust into the economy.

However, Osborne is expected to resist lobbying to bring forward the announced cut in corporation tax to 20 per cent in 2015 to now, at a cost of around £800million.

It would not be an Osborne Budget without some surprise even if the fiscal envelope is narrow. Much has been written about the 4.7million people now in the 40 per cent tax band with the allegation that this is a levy on aspiration.

No one will be more aware of this than the Chancellor, so he is certain to try to address the issue – perhaps through fuller valorisation (adjustment for inflation) of tax allowances. That seems the most obvious place for a rabbit out of the hat.

Mutual destruction

Lord Myners’ review of the way the Co-operative governs itself pulls no punches. It is deeply dysfunctional, operates for the privileged few, not its army of members and is short of business acumen.

His most worrying observation is that the big mergers engineered under the stewardship of former chief executive Peter Marks – the purchases of Somerfield and the Britannia – have been ‘breathtakingly value-destructive’ and left the organisation with debts ‘that are no longer sustainable’.

Myners’ answer is to shrink and modernise the group board, so that it is dominated by genuine non-executives, not Co-op cronies, and includes the two senior executives with a mission to run the commercial operations.

The ethical and social agenda will be policed by a National Membership Council which would elect its own executive. It all makes eminent good sense.

Whether the old guard of paid time servers will approve any of this, even with the risk of administration, is a moot point.

Bubble.com

Another day and another online float with Boohoo.com soaring to a 70 per cent premium on AIM. Whether there is much more room in a crowded young fashion space dominated by Asos requires a great leap of imagination.

Boohoo might be cheap and cheerful but so is Next with demonstrated IT and logistics skills. And Primark has shown shoppers will still flock to the high street for value. Handle with care.

Tony Benn

As a minister Tony Benn was associated with Harold Wilson’s white heat of technology vision and one of the creators of the Industrial Reorganisation Corporation headed by former Courtaulds chief Sir Frank Keaton.

Many see his most enduring legacy as the disaster of British Leyland that ate up countless billions of taxpayer funds – a sort of pauper’s Royal Bank of Scotland.

But Benn also helped deliver ICL, now owned by Japan’s Fujitsu, and Arnold Weinstock’s GEC.
Intervention was not entirely hopeless.