Wednesday, March 21, 2012
First thoughts on the budget
Posted by David Smith at 03:00 PM
Category: Thoughts and responses

A budget that cuts the top rate of tax from 50p to 45p, raises the personal allowance next year from 8,105 to 9,205 and reduces the main rate of corporation to 24% from April, 22% in two years, and with an ambition of 20%, can't be all bad.

Along the way, George Osborne stemmed the self-inflicted wound of removing child benefit from higher rate taxpayers. Instead, households will only start to lose the benefit when there is an earner on 50,000 and it will be progressively but not suddenly withdrawn up to 60,000, after which it will stop. A messy but probably politically effective solution.

The economics of the budget were straightforward enough; this mornings's disappointing public finances destroyed hopes of a big undershoot in borrowing, and of any giveaway. The Office for Budget Responsibility's 2011-12 number came down only fractionally, from 127 billion to 126 billion.

There was a similar small change in the OBR's growth forecast, up from 0.7% to 0.8% this year. In general, though, it remains a story of jam tomorrow - 2% growth in 2013, 2,7% in 2014 - low inflation, which will help restore real income growth and thus consumer spending, is key to this.

Was it a tax reforming budget? Not in the 1888 Nigel Lawson sense. Indeed not in many senses. It appeared too detailed and micro for that. Were there any surprises? If there were, they were all in the small print. Did it do enough at this stage of the parliament? Probably.