The Chancellor closed his budget declaring that it was:
A Budget for a Britain that wants to be prosperous, solvent and free.
In actual fact, the budget is unlikely to do any of that. In fact, on the macro-scale, it will do precisely nothing. And that’s not my estimate, that’s the OBR’s, which writes:
The Government has announced a number of policy measures that are expected to have a broadly neutral fiscal impact in aggregate between 2012-13 and 2017-18, with ‘giveaways’ almost exactly offsetting ‘takeaways’ over this period. Correspondingly, we also assume that they will have a broadly neutral effect on the economy, with no impact on the level of GDP at the end of the forecast horizon.
So the OBR thinks the fact that the budget is fiscally neutral means it is unlikely to have much effect on growth. But what about the medium-term changes?
The reduction in the main rate of corporation tax from 2015-16 has a small positive effect on business investment in our forecast, while the decision to abolish the contracted-out NICs rebate slightly reduces disposable income and household consumption. The Government has also decided to increase capital spending and reduce current departmental spending from 2015-16. Given the long time horizon and the fact that the overall net effect of these changes is relatively small, we have not adjusted our overall GDP forecast.
No change there then. It goes on and on. Introducing an allowance for employers’ national insurance contributions:
Given the small size of these potential effects we have not made any explicit adjustments to our forecast.
The expansion of the Help to Buy scheme, the Build to Rent Fund, and the Right to Buy scheme:
…likely to have a relatively small additional impact on transactions and residential investment.
The only major impact assessed is with the cut in beer duty and fuel duty, which are likely to reduce CPI inflation by around 0.1 percentage points for 12 months.
It’s not a budget for prosperity, it’s not a budget for growth. It’s a budget for nothing at all.