by Simon Fitzpatrick
We were warned that this would be a no-change Budget, and it seems that was no bluff.
Yes, Osborne is cutting a little more from departmental budgets and yes, he’s spending a little more on housing and infrastructure.
He will accelerate the rise in personal income tax allowances, cancel the planned fuel duty rise for a second year and go further on cutting corporation tax.
But predominantly these are measures that were already in place, and going a little further on them in no way alters the direction of travel.
And try as he might, the chancellor cannot disguise the fact that that direction of travel is not pretty. By every one of his self-set tests, George Osborne’s plan is not working.
A chancellor who pledged to eliminate the budget deficit in this Parliament now concedes that we will still be running a deficit of 2.2% in 2017-18. Debt as a percentage of GDP will not begin falling until the same year. And growth forecasts are down again – just 0.6% is forecast this year. If the OBR’s track record on forecasts is anything to go by, we’ll be lucky if there’s not a “negative” in front of that figure.
In the face of so much bleak news, Osborne seemed determined to win himself some positive headlines regardless by announcing some populist measures for the ‘man on the street’. The man on the street George Osborne has in mind drinks beer and drives a Vauxhall Astra, though hopefully not in quick succession.
Cynicism aside, there are some welcome measures in this Budget. Knocking £2,000 off employers’ national insurance contributions will be a boost for small businesses looking to hire extra workers, and action to boost house-building offers the prospect of a shot in the arm for the construction industry.
The most significant new announcements related to help for house-buyers. A new scheme will offer a 20 percent loan to those who put down a 5 percent deposit on homes up to the value of £600,000, while a mortgage guarantee scheme will help lenders provide loans to people without deposits. This is expected to encourage lending worth £130bn. These are certainly bold schemes. Let’s wait and see what the level of uptake will be, though some, including the Royal Institute of Chartered Surveyors are already warning that this could create another housing bubble.
The chancellor, who is said to have told a colleague recently that his main goal was to avoid a repeat of last year’s omnishambles, will be pleased with the early reaction. But for Labour there is no shortage of grim news tucked away in the growth forecasts and debt projections to suggest that the government will not be hailed as economic whizz-kids anytime soon.
Ed Miliband’s response felt oddly similar to last year’s, and after today’s Budget, I wonder whether anything will really have changed next year either.
Only time will tell. In the meantime, I’m off for a beer.
Simon Fitzpatrick is a member of the Labour party and works on financial policy at Cicero Consulting