Wednesday, 22 April 2009

The Evening after the Budget before...

Well, there we have it, a pretty unremarkable and downbeat Budget from Chancellor Alastair Darling. To anyone following the economic news and reading the runes, there wasn't a lot of new stuff. Indeed, Nick Clegg accurately called it a "mishmash of old announcements".

Let's start with a few positives - moves to increase the cash and share ISA limit are welcome as inducements to save. Measures to aid the unemployed will help and bookmakers will be relieved there was no action to increase the Gross Profits Tax they currently pay.

The new 50% tax rate is no surprise but is of course a political rather than an economic move. I'd rather lower rates of tax were cut but as relatively few people earn £150k or more I suppose it's a form of "punishment" that some will welcome.

The assumptions on growth suggest Darling is a member of the "V" recession club. For him, we are at or near the bottom now and growth will rebound strongly in the next two years. As most Treasury forecasts need to be taken with a bucket of salt, I'm pretty cautious. I suspect any return to growth will be far lower than the 3.25% being mooted by Darling.

The growth figures are of course a political move too aimed at boxing in George Osborne as are the first indications of real spending cuts. Whether past commitments to health, education and the Police make Osborne a hostage to fortune remains to be seen but he knows, as I do, that the REAL pain will follow a Conservative election victory.

As for Darling and Labour, this Budget smacked of a tired, dispirited and demoralised Government, battered to inertia by events and devoid of solutions. Of course, Government supporters would argue that much has been done since the crisis broke last October but of course that meant the cupboard was bare today.

With interest rates slashed to ribbons and huge levels of public borrowing and debt, there aren't many cards for a beleaguered Chancellor to play. When George Osborne announces his first Emergency Budget in July 2010, his supporters will no doubt cheer him to the rafters. The problem of course will be the political price to be paid for the pain inflicted.

That will be the real test for David Cameron - up to now, it's been easy going.

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