BUDGET COMMENT

Professor David Bailey, of Coventry University Business School, gives his assessment of the Budget

We didn’t expect a giveaway Budget.

Inflation in February was up to 4.4 per cent and the public finances were in the red by more than £10 billion. Despite the political rhetoric from the Government over a Budget for growth, we expected a fiscally-neutral steady-as-she-goes Budget. It’s probably what Osborne wanted all along, and it’s certainly what we got.

Osborne, no doubt, will use the latest inflation and deficit figures as cover for his decision to stick the course.

But that’s not to say that Osborne is right. He’s taking a big gamble. If – a big if – the economy can really withstand the toughest fiscal squeeze in decades then Osborne will take the credit for being an ‘iron chancellor’.

But if Osborne has got it wrong then we’re stuck in a sort of low-grade stagflation that’s about to be made worse by ‘too far too fast’ spending cuts, and maybe higher interest rates as well. And getting the deficit down anyway depends on growth generating tax receipts.

So where does that leave us?

Firstly, from a political point of view, was it a Budget to really “ease the squeeze” or is it “hurting but not working”?

The coalition Government will argue that Osborne did what he could by raising personal tax allowances by £630, taking more people out of paying tax altogether, and by cutting fuel duty by a penny a litre to help households and firms – paid for in effect by a windfall tax on the profits of North sea oil companies.

Increasing the personal tax allowance to £10,000 is a cherished goal for the Lib Dems, and Osborne also offered up the hope of a cut in the 50 per cent tax rate as well at some point in the future. But not right now.

The riposte to this is that Osborne is giving with one hand, but more than taking away with the other. The January VAT increase and April National Insurance rise more than offset the latest give-aways. And with wages growing by about two per cent but inflation somewhere between 4.5 and 5.5 per cent, people are feeling a very real squeeze on real incomes.

Whether they’ll blame this Government or the last one is the big political question.

Secondly, on the economic front, this budget was long trailed as a budget for growth – ‘from rescue to reform and recovery’.