This “no change” Budget fails to inspire

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

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2 Responses to “This “no change” Budget fails to inspire”

  1. Ex-labour says:

    So what is Labour’s solution ? All we hear is “spend more” but no policies have been presented by Labour. At some point they will have to tell the already sceptical electorate how much they are going to spend, and more importantly, where they are going to raise the money. The public will not forget, and the polls tell us this, that it was Labour who spent way too much last time round. Their policy of redistribution got Brown and Balls into a complete tax farce and we are in the ludicrous position of
    taking tax from people’s pay only to give it back as a tax credit. It’s high time the left understood more about personal property and personal responsibility.

  2. Lucy says:

    How can someone actually be inspired by a budget which had no changes applied? Spending a little bit more on housing is important, but agriculture requires an increase in funding as well. We surely do not want to see food prices to go up in groceries stores the next season; therefore, we should take care of it today. You’re saying that predictions say that the debt won’t start falling until 2018. I am sure you are incorrect. If the government keeps on having same policies, chances are high that debt is not going to start decreasing all up to 2020 or even later. Just think of this. Our outstanding personal debt is too high as well. I guess it is fair to start with limiting the number of cash loans and credit cards one person can obtain. This can be a really good start

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