Budget 2016: Unjust and economically illiterate. Is that the legacy George Osborne wants?

Outlook

Britain's Chancellor of the Exchequer George Osborne takes his seat after delivering his Budget to the House of Commons

It’s a traditional post-Budget ritual for the Institute for Fiscal Studies to opine a day after the event.

This time around, what some might see as Britain’s real independent Office for Budget Responsibility said George Osborne is running out of “wiggle room” if he is to meet his target of a budget surplus in 2020.

Giving him only a 50:50 chance of hitting it, on current projections, the IFS is concerned about the deterioration in global economic conditions. How he deals with those conditions may define his legacy far more than any surplus, or lack of one, in 2020.

If the current direction of travel continues, he will face two options. He could either increase taxes and cut spending (again) in a bid to hit that target. Or he could just throw it out of the window and make policy based on a pragmatic assessment of Britain’s economic needs. There are some grounds to hope for the latter. This Chancellor has, after all, missed targets before.

The budget deficit was supposed to have been eliminated by the end of the last parliament. It didn’t happen.

However, this time it’s different. David Cameron is planning to step down as prime minister at the end of the current parliament. Being the guy who eliminated the deficit therefore assumes greater political importance and could encourage Mr Osborne to take more risks. And to plumb new depths.

Take the cuts to disability benefits, which will have a brutal impact on thousands of people. They appear to have been imposed not just with an eye on the deficit but also so that fuel duty can be held and people can buy their petrol slightly more cheaply.

Around 20 Tory MPs are said to be deeply unhappy. If their backbones are stiff enough, they may yet prove that such a thing as compassionate Conservatism exists.

But it’s not just the callousness of what is being contemplated that makes these cuts problematic. If they stop disabled recipients working – a distinct possibility – they will inevitably become burdens on the state. The cuts thus become self defeating.

Yet more of this may be coming if hitting his self-imposed, and rather silly, target is to be met at a time of global economic upheaval. And that assumes Britain remains in the EU. If not, all bets are off.

Sadly, the Chancellor appears set on propping up a totem even if it damages Britain’s economy and drives a cart and horses through social justice.

Socially unjust and economically illiterate? What sort of a legacy is that?

Investors aren’t begging for more as pharma boss leaves

Talking of legacies, how should we view Sir Andrew Witty’s at GlaxoSmithKline?

Mixed is probably the diplomatic way of putting it. He has been garlanded with honours and is departing with £40m in his back pocket. Was it all well earned? That’s rather open to question.

To be fair, he has done some good things. One of his most notable deals was the $20bn (£14bn) asset swap with Novartis that traded cancer drugs for vaccines and has been hailed as innovative – and far more advantageous to shareholders than blowing lots of their money on an overpriced purchase.

He has built stable earnings streams from that and consumer healthcare, which helps cushion the group from the volatile pharma market (and GSK’s poor drugs pipeline).

Yet, at the same time, he could be said to have over-promised and under-delivered on returns. That is partly why he is staying on until next year, when a promised return to double-digit earnings growth is supposed to materialise, which might mollify some of his more trenchant critics.

Some of them. His successor will have to deal with noisy calls for a break-up from activist investors now circling the company.

Some of Sir Andrew’s opponents have suggested that GSK is now an amalgamation of four FTSE 100 companies, none of which is being run particularly well. That might be over-stating it a bit, but it is a criticism that deserves a space on the charge sheet.

And those sheets are something GSK has seen too many of during Sir Andrew’s tenure, what with the corruption scandals that have dogged it.

The market’s verdict on the news of his departure was decidedly tepid. When a truly starry chief executive falls on their sword, the lights go out and the shares tumble.

GSK’s finished the day down by just over 1 per cent, which speaks volumes. There’s been a lot going on under Sir Andrew, but the shares have basically drifted.

Whatever dangers you see, this man can trump them

Oh dear. The Economist Intelligence Unit has rated Donald Trump becoming president of the US as one of its top 10 global risks.

Not very surprising, you might think, given the Donald’s rantings about building walls on the Mexican border, his bellicose rhetoric towards China, and the threat of him sailing the US economy into a protectionist iceberg.

Given that little lot, and watch some of his rallies because there’s plenty more where that came from, it’s fair to say he poses more risk even than a potential Brexit or an armed clash in the South China Sea.

But here’s the bigger problem. Mr Trump is not the number one risk. No, Russia’s interventions in Syria and the Ukraine and a hard economic landing in China are rated as even bigger dangers. What will he do to secure the top spot? He’s not a man who likes coming second, or worse. Be afraid. Be very afraid.