Today, George Osborne delivered his sixth Budget statement, the last before the General Election, in which he announced optimistically that “Britain is walking tall again”
As expected for a pre-election Budget, it was an intensely political statement, with significant amounts of rhetoric devoted to the progress the Government has made on economic growth, jobs, living standards and on tackling the deficit since it came to power in 2010. Osborne presented these points as a clear vindication of the fiscal and economic policies he and the Government have pursued from the outset, declaring that “we took difficult decisions in the teeth of opposition and it worked”.
The facts and figures from the OBR which lie behind the Chancellor’s rhetoric reveal a relatively positive, if modest, view on the economy and on the nation’s finances. The OBR’s figures show that the UK’s economic growth in 2014 has been revised down since the Autumn Statement from 3% to 2.6%, though it is up slightly for 2015 and 2016, before levelling at 2.3% for the following two years. Figures on government borrowing and the deficit are lower in every year than they were at the Autumn Statement, helped largely by the lower interest charges on government gilts and lower welfare bills, thanks to falling unemployment. The Chancellor also announced that the Government would sell £13 billion of the mortgage assets from Northern Rock and of Bradford and Bingley and at least a further £9 billion of Lloyds shares in the coming year – a considerable contribution to the public finances.
Despite this positive news, Osborne was very keen to stress that he was ruling out using these additional funds as part of any pre-election windfall, but instead would use them to pay down the national debt and put economic security first. Osborne set out the £30 billion further savings that would be required to achieve the falling debt share by 2017-18, which would come from government departments, welfare savings and from tackling tax avoidance and evasion. There was still plenty of room, however, for some headline grabbing announcements to demonstrate the Government was on the side of ‘hard-working people’ and other carefully targeted groups of voters. The confirmation that the personal tax-free allowance will rise to £11,000 in 2017 arguably represents the most significant measure in terms of a tax cut for working people, but there were also a range of other measures designed to help savers and pensioners, the self-employed, small businesses and first-time buyers.
Aside from showing that the Government was on the side of ordinary hard working people, the clear political message from the Budget was that Britain is on the right track, but it is an unfinished job and needs a Conservative Government to see it through. This message is central to the Conservative’s election campaign and to its often repeated phrase of a “long-term economic plan”. Indeed, the evidence shows that Government attempts to tackle the deficit very much remain an unfinished job. According to the OBR, the projected cuts in the next Parliament will be significant and represent “a much sharper squeeze on real spending in 2016-17 and 2017-18 than anything seen over the past five years”. This point was seized upon by Ed Miliband and Labour, who accused the Chancellor of planning “extreme cuts” and attempting to hide where these savings would actually come from.
This Budget represents the last significant announcement from the current Coalition Government before election campaigning begins – and arguably, represents more of a pre-election pitch than a long-term economic plan. It is very possible that many of the projections and proposals outlined today will be changed by an incoming government in a few months’ time.