Mr Osborne’s pattern of behaviour

Here’s the link to my rather long Channel 4 interview about George Osborne’s school-boy economics. A transcript of my Sky interview is below.

Basically George Osborne first said there were ‘secret’ tax plans. So secret they were set out in Table 2.9 (page 40) of the Budget’s ‘Economic and Finances’ document, and Table C7 (page 235) of the Red Book.

Then we heard there ‘must be a black hole’ because we projected money from taxes goes up sharply in future years. Of course it does. Partly because we announced tax rises for top earners in the last budget.

Second, because as an economy returns to growth, tax receipts go up – part of a process called ‘fiscal drag’. In a downturn income tax falls sharply – by some £12 billion we estimate. But in a recovery, they bounce back. National Insurance contribution don’t move around so much because they are a flat rate tax.

Conclusion? Either George Osborne doesn’t understand public finance. Or, he’s determined to twist the truth. Neither is a good sign for his future. Sky transcipt below….

Sarah-Jane Mee, presenter: Well, for more now on the shadow chancellor’s claims, we can talk to the Chief Secretary of the Treasury, Liam Byrne, who joins us from Birmingham. Good afternoon to you, Mr Byrne. Thanks very much for joining us.

Liam Byrne, Minister for the Cabinet Office: Good afternoon.

SJM: Can you tell us what your reaction was when you first read these claims?

LB: Well, disbelief really. I mean, I think George Osborne has really just made the worst of schoolboy errors this morning. And the difficulty for me is that he either doesn’t understand economics or he is deliberately distorting the truth and, I am afraid, neither is a qualification to be chancellor. And, I’m afraid, you know, this truth problem for Mr Osborne is now becoming a pattern of behaviour. He was caught out a bit earlier on this year when he said that, I think, Gordon Brown denied him access to a spending database when actually it was a decision made by impartial civil servants. So I’m afraid it is time to grow up and start behaving seriously to engage in what is a serious debate for this country, not the kind of juvenile politics of the student union that I’m afraid we have seen this morning.

SJM: You released a statement this morning accusing him of misleading the public. Are you accusing him of lying or just not doing his homework?

LB: Well, I’m afraid that is for Mr Osborne to clarify. I mean, as I say, he has really messed his figures up this morning. These were figures that were published very clearly in the Treasury Budget – they are there for everybody to see. There is actually a law that says we have got to be upfront about the projections that we make. They can only be projections that are made on decisions that have already been announced. So, as I say, either he just didn’t get it – he didn’t understand it – or he is deliberately, you know, misinterpreting and sort of trying to mislead the public. He needs to tell us now what he got wrong. Was it his economics or was he just not being straight?

SJM: Well, the Tories are sticking by their claim that this rise in these figures of nearly a third in five years is so high it can’t simply be explained away by relying on a normal recovery from the recession.

LB: Well, that’s exactly what the figures do rely on. I mean, the truth is that income tax goes down a lot when you go into a recession – so income tax receipts were down a bit over £12 billion over the last year and a bit – but income tax also comes up very sharply as the recovery sets in, as people come off short-time and peoples’ wage packets grow bigger – perfectly normal. So to not really understand that, I’m afraid, really says quite a lot about George Osborne’s grip on public finances.

SJM: Labour’s projections for the recovery from the recession have been described as optimistic. If it isn’t as optimistic as you predict, can you categorically say that there will be no tax rises to plug the shortfall?

LB: Well, tax decisions are going to be, are always the decision of the Chancellor. And Alistair Darling will come back to Parliament with the Pre-Budget Report and then the Budget a little bit later on this year and then early in the spring next year. We are confident about our figures for economic growth. We are cautious – of course – because there are risks around and we know this, that if Mr Osborne got his hands on power, he would strip away the help we’ve put in place for half a million jobs and he’d strip away the help that is currently keeping 300,000 people in their homes. I’m afraid that would just be a recipe for a recession that cut deeper and cut for longer.