This was, as I suspected, an empty budget. There was the usual whale spray of policies: a penny off beer duty here, petrol tax reduced there. Nowadays, we don’t have to wonder if the Budget will make a blind bit of difference: the Office for Budget Responsibility sees the figures in advance and does the sums. It concludes that the Budget will have ‘no impact on level of GDP at the end of the forecast horizon’. To Osborne’s credit, he didn’t try to spin this. The recovery has stalled and he has run out of ideas about how to start it again. It’s difficult to put a gloss on this basic fact.
As always, the small steps that Osborne did take were in the right direction. Extending the corporation tax for a year, so it hits 20pc in 2015, is a good idea. The national insurance holiday for small companies who hire up to four workers is a good idea – but the Budget doesn’t quantify it. By my maths, this will make workers 4 per cent cheaper to hire. Welcome, but not enough to dent the massive youth unemployment. Cameron said before the Budget that he’d cut tax for 24 million people. What he didn’t say is that this tax cut is worth £1.51 a week (according to Policy Exchange). Cutting 1p off beer duty is also welcome, but cutting 1p off the basic rate of income tax would be more welcome still. And that’s what’s needed to make a difference to the economy: a serious tax cut, one that (for example) gives low-paid workers an extra month’s salary every year.
This was a steady-as-she-goes budget. That would be a more encouraging fact if we were heading out of recession. As it stands, we’re in the middle of a lost decade: GDP per capita will take until 2018 to get back to where it was in 2008. But Osborne is, by his own admission, fiscally conservative but a monetary radical. He doesn’t have much faith in the ability of Budgets to change the trajectory of the economy – so didn’t pretend otherwise today. Personally, I sympathise with those who had wanted this Budget to be a rupture seeing it as the last chance to improve things before the election. Osborne disagrees.
The most important aspect of this Budget was the forecasts in the OBR report. We’ll trawl the small print here on Coffee House, and we’ll update you later.