Osborne attacks Treasury economic model as “work of fiction”

In today’s Financial Times, George Osborne appears to question the credibility of Treasury civil servants by spuriously suggesting that public finances have been manipulated. The shadow chancellor has seen comparisons with Greece where none exist. Could a fear of copycat riots be the reason why he is cultivating a pre-election atmosphere of emergency?

In his FT interview today, Osborne says:

“The [Budget] Red Book is largely a work of fiction”.

A Treasury spokesman directed Left Foot Forward this morning to Boxes C1 and C2 of the Budget. The former is a list assumptions audited by the National Audit Office. The latter outlines how “caution” is worked into the fiscal forecast. In making its predictions about the deficit, the Treasury assumes that growth will come in lower than expected; that the gap between VAT receipts and the theoretical tax liability will rise; and that the unemployment claimant count will stay at 1.74 million and not fall back to 1 million by 2014 as projected.

It is unclear which of these assumptions and cautious estimates George Osborne regards as “fiction”. But if the Treasury’s predictions are wrong, it is likely to be in the taxpayers’ favour. Indeed, last month’s ONS figures showed that borrowing was “less than [Chancellor] Darling predicted“.

As Channel 4′s Faisal Islam tweeted earlier, “European Union revises UP Britain’s economic prospects to 1.2% in 2010 from 0.9%. Nxt yr 2.1 % highest of major European nations (corrected)”. Although it’s been a long and deep recession, the impact has been less severe than in previous recessions as Jonathan Freedland explains in today’s Guardian:

“Unemployment, house repossessions and bankruptcies are all fractions of what they were in the 1990s recession. That’s not by accident. It’s a function of Labour’s active interventionism, which has sought to reduce the impact of the downturn on those at the sharpest end.”

But he goes on to issue his own caution:

“Such state activity clashes with every Conservative instinct. Cameron still describes government as more problem than solution. Last time the Tories were in charge, dealing with a recession that was actually much less severe, the pain was greater and the weakest suffered most. There is nothing in current Tory policy – despite Cameron’s final debate plea to the camera that it’s “the most vulnerable, the most frail and the poorest” he truly cares about – to suggest it won’t be like that again.”

Business leaders are clear in a letter to today’s Telegraph that Tory cuts, “could risk tipping us into recession again with profound consequences for business and jobs”. But George Osborne is hell bent on ushering in his “age of austerity” regardless of economic necessity.