The Chancellor was trying to make two, somewhat contradictory, points in his last Budget before the election. We'll know soon enough how persuasive he has been
Pre-election budgets are always tricky. Politicians are tempted to offer jam tomorrow if only you vote them back in. But the public dislike being bribed with their own money and become deeply sceptical. George Osborne also needed to say two seemingly contradictory things about the state of the economy: that the economy has recovered well and that we are not out of the woods – so you can’t risk Labour or some flaky coalition.
But when it came to it he took advantage of some extra revenues – caused partly by lower interest rates on the debt and by lower inflation as a result of the oil price drops - to dish out some carrots aimed at key voters.
This included the much trailed raising of the tax free allowance – a consistent policy from the coalition that is neither the most progressive way of helping the poor nor one with much political resonance. It also included reductions in duty on beer, a further freezing of petrol duty and help to the young trying to get on the housing ladder – with the 'Help to Buy' ISA . However, with no substantial steps to increase housing supply that can only increase house prices.
This ‘give away’ however gives the other parties some room to play with. If Osborne is saying there is spare money to cut these taxes then other parties are slightly off the hook on deficit reduction. And indeed his changes mean that the difference between what Labour and the Tories says they might spend has been narrowed – even if it is still substantial This may turn out to be political brilliance or a big mistake. We will know in a few weeks time.
On the economics, the OBR projected growth, but the figures for the next few years, hovering around 2.3%, are pretty unspectacular and they still portray an economy taking an awful long time to generate anything much in the way of increased living standards for ordinary families. And the debt is still far above what was expected by the Chancellor when he set off on his austerity road. But at this stage, while the economy of course matters, it’s the politics stupid that was uppermost in the Chancellors mind.
