Things can only get better. Or at least marginally less worse. That was the determinedly upbeat message from George Osborne’s third Budget.
Some statistical scraps from the Office for Budget Responsibility bolstered the chancellor’s case. Growth, though still dire, has been revised upwards for 2012 (if only by 0.1%). Borrowing forecasts for 2011/12 are slightly lower than they were last autumn.
The eurozone crisis is far from over (see the April feature, Spinning out of control), but fears of a UK double-dip recession have receded for the moment. So what did Osborne do with his temporary good fortune?
Controversially, for a Budget billed as one for ‘working people’, it gave a hefty tax break to the top 1% of earners, by cutting the 50p rate. Corporation tax was lowered too.
In a nod to his coalition partners, the chancellor did raise the personal tax allowance. But pensioners, the 2.7 million unemployed and many in the ‘squeezed middle’ still stand to lose out. A Robin Hood budget this was not.
All of which is consistent with current government priorities. The OBR has radically cut back its forecast for business investment growth from 7.7% to 0.7% in the current year. There is little sign of the ‘march of the makers’ promised in last year’s Budget.
So this one focused on supply-side measures aimed at shrinking the state still further, and signalling Britain is ‘open for business’. The biggest short-term losers are those who work for, or depend upon, the public sector.
Already into year two of a pay freeze, public servants now face more income cuts due to the imposition of regional pay. The OBR has upped its forecast for public sector job losses to 730,000 by 2017. With another 80% of spending cuts still to come, pain levels are rising.
Ironically, as the Institute for Fiscal Studies has pointed out, the Treasury is meeting its borrowing target only because of under-spending by government departments and local authorities.
In the UK, as elsewhere, local government finances are under severe pressure, and communities are suffering (see the April cover feature). Some authorities could even face insolvency.
In this context, the chancellor’s Budget giveaways for the wealthy are a huge gamble. If private firms fail to replace the jobs lost to the public sector, unemployment – and the welfare bill – will soar.
The news may not, even superficially, appear so sanguine next time.
