Budget 2011 – reaction

George Osborne has bowed to growing concern over the biggest squeeze in living standards since the second world war with an instant cut in fuel duty, but had his claim to be delivering a budget for growth undermined by the ominous prospect of lower growth, rising unemployment and higher borrowing. While insisting the government was sticking to its austerity plan despite a gloomier outlook for the economy, the chancellor levied a surprise £2bn windfall tax on North Sea oil companies to finance a populist 1p a litre reduction in the price at the pumps as the unexpected finale of a reform package focused on reversing Britain’s economic decline. The chancellor said he was “putting fuel in the tank of the British economy” by liberalising Britain’s planning laws, scrapping red tape, simplifying the tax system and creating a Green Investment Bank to fund the expansion of environmental companies. But he was forced to admit that growth this year would be just 1.7% – lower than the 2.1% expected – while 200,000 fewer jobs would be created during this parliament. Figures from the independent Office for Budget Responsibility showed slower growth would result in £45bn extra borrowing between now and 2015. – the Guardian

The Chancellor announced a £2 billion-a-year windfall levy on North Sea oil to fund an immediate cut in fuel duty of 1p per litre. He also postponed a 5p rise in fuel duty due next month and introduced a fuel price stabiliser to keep costs at the pumps down… Elsewhere, Mr Osborne announced a staged 3p cut in corporation tax, a £326 tax cut for 23 million low to middle earners and a fund to help first-time house buyers. But these were among few giveaways in a Budget dictated by the stagnant state of the economy. The Chancellor was forced to admit that growth would be slower than expected over the next two years and that he would have to borrow more than originally forecast to plug the gap in the public finances. He refused to change his strategy for cutting the deficit, saying: “We have a plan and we’re sticking to it.”… The announcements were welcomed by motorists and business groups. However, economists pointed out that the small savings to households were likely to be dwarfed by sharp tax rises that had already been announced and come into force next month. – the Telegraph

It is getting hairy. This only works if we get decent growth – solid thumping growth of close to 3 per cent a year by the back end of this parliament. If we get that, the national debt levels out and starts to come down as a percentage of GDP. If we don’t – and the challenge will be to grow faster than the rest of the EU and well above our long-term trend – then it is not just the Coalition that is in trouble. We all are. So is this really a Budget for growth? Well it is not a Budget against growth, and since the main business bodies have given it a general welcome, that’s a start. But the debt mountain is as high as ever and if this Budget tells us anything, it is that we need things to come right in the next four years – or, in grander language, for a lot of the economic variables to turn out to be towards the more favourable end of the possible scale. So far, looking at our latest growth and inflation numbers, rather the reverse seems to be happening. – the Independent

Ed Miliband lambasted George Osborne as “the wrong Chancellor” yesterday, accusing him of putting the recovery at risk and squeezing living standards by cutting public spending “too far and too fast”. The Labour leader denounced Mr Osborne for pursuing the wrong economic course, pointing to faltering growth, rising inflation and growing unemployment as evidence that the tough medicine was not working. He argued that the centrepiece measures of the Budget – the rise in income tax thresholds and the 1p cut in fuel duty – were dwarfed by other tax increases in the pipeline. Producing an instant response to a Budget statement – even a leaked one – is one of the toughest jobs in Parliament and Mr Miliband frequently struggled to make himself heard in rowdy Commons scenes. Lindsay Hoyle, the Deputy Speaker, was forced to appeal for calm as MPs hurled insults across the chamber. Mr Miliband deployed a series of jokes crafted by his new press team to deride the Coalition’s strategy and accuse it of ideological inflexibility.- the Independent (more…)

Osborne prepares to deliver budget

Only a short but eventful year ago, George Osborne was no one’s idea of a chancellor. He routinely trailed Vince Cable and Alistair Darling in polls of the City, the public and business for competence. Mervyn King told the US ambassador he was worried by his lack of experience. Peter Mandelson identified poor George as the Tories’ “weakest link”; dark rumours circulated that he would be replaced by the apparently full-of-mojo William Hague. Yet now Mr Osborne has confounded his critics and emerged as the most formidable operator in the Government, and it is fair to acknowledge that (though some of us rated him in opposition a bit higher). He does not exactly bestride the British political scene today, but then again nobody does. In any case the eyes of the world will be elsewhere today – on Portugal, whose government may topple if its austerity budget is not passed today, in which case the eurozone could be plunged yet again into existential crisis. The UK’s sovereign debt trauma never arrived. Mr Osborne calls this “the absence of war”, and much of it is down to him. Quite an achievement for “the weakest link”. – the Independent

Time for George to stop blaming the snow and go for growth

IN today’s Budget George Osborne will boast he’s a man with a plan. He’s right – a political plan to cut services now in the hope he can bribe voters with tax cuts later, before the next election. He blames his ­decisions on Labour and hides behind the Lib Dems. But this isn’t an economic plan. And it’s not working. A year ago, under Labour, unemployment was falling, ­inflation was lower and the economy was growing strongly. But yesterday we saw inflation rise again, the number of people out of work is now at a 17-year high, and the economy has ground to a halt. But all the Tories can do is blame the wrong kind of snow. The Tories said they were the most family-friendly government in the world. But they’re giving the banks a tax cut while clobbering families with children hardest. They told us the NHS would be safe in their hands. But they’re cutting funding in real terms. Today, I think Osborne will cancel April’s fuel duty rise, as Labour did when world oil prices were going up. But will he reverse the Tory VAT rise on petrol? He’ll claim to help more young people get work placements. But, with nearly a million out of work, is it enough? – Ed Balls, the Mirrror (more…)