So just how are budgets made behind the scenes? Our next one is on March 15, but work began well before Christmas.
Treasury officials are the brightest in Whitehall and they start a gentle process of guiding Chancellors to focus down on their main objective for what is known as a ‘fiscal event’. I, of course, told them I wanted to focus on my four ‘E’s: Enterprise, Employment, Education and Everywhere.
They then set up what is called a ‘scorecard’ – a double-sided A3 piece of paper which is effectively a giant spreadsheet. It lists every single measure you might consider alongside its impact on the national accounts over the next five years. Every number on the spreadsheet is a billion – and it covers nearly one trillion pounds of tax and spend overall.
Those measures are then added up and fed into estimates of inflation, unemployment, debt and broader economic growth.
The result is a number right at the bottom of the back page which tells you the ‘headroom’ you have left if we are to meet our fiscal rule for debt to be falling as a proportion of GDP by the fifth year. That number matters because it is a signal to the outside world of our willingness to pay down our debt.
To give it extra credibility, since 2010 it has been audited by the independent Office for Budget Responsibility (the ‘OBR’). Some people complain that our system gives an outside body too much power. But in fairness they are simply checking that a Chancellor is keeping the promises he chooses to make.
It is true that by independently auditing the numbers a Chancellor presents in a budget, we subject ourselves to a discipline that no other country does – but financial discipline is surely a good thing to sit at the heart of our system.
By the time you read this I will have received the OBR’s forecasts for the economy and tax revenues before any changes I wish to make in the budget. I have now also shared – in strictest confidence – the things we are planning to do.
They then feed that into their model to see whether we are sticking to our fiscal rules. That allows me to stand up in parliament and announce a package that has been rigorously checked.
Next week I have to present the budget. It is one of the biggest parliamentary occasions of the year and I have always found it better to write my own speeches – although I get tremendous help from my team in crafting it and checking any facts or statistics.
I found myself staying up until the small hours to do that ahead of the Autumn Statement. But in fairness it is a gruelling process for all involved because it is just so important to get the calculations right.
Nor do things stop after you have delivered it: there is a nervous wait for the verdict from the press, and even more importantly from the respected Institute for Fiscal Studies who report the next day.
Then, of course, there is the verdict of history which may take as long as a general election to fully understand…