Wednesday, 21 March 2012
“Public Sector Net Borrowing in February 2012 was a deficit of £15.2 billion, £6.3 billion higher than in February 2011 and a record net borrowing for February.” So said the Office of National Statistics(ONS) on the morning of Mr Osborne’s budget.
What does it mean? Well, It is the size of the country’s debt. But just like household debt when you’ve in the financial mire your options close. So this high PSNB means the Chancellor has very little wriggle room in this budget.
It is a bit of a shock to those economists who’d been pushing the line that the Chancellor’s policies had been working and that UK borrowing for this year would be lower than forecast. This morning’s figures show that there will be very little if any undershoot. Never trust optimistic economist’s, it’s not called the dismal science for nothing.
Predictably traders panic and suddenly the pound drops sharply. At the time of writing half a cent against the US dollar to $1.584.
So within the tight margins that he had available, how did the Chancellor do?
Well, he styled himself and his budget as championing business, and indeed with corporation tax heading for 22p over the next three years he certainly is entitled so to do.The rate was already due to decline to 25% this year; it will now fall to 24%, and there will be a further two 1p cuts in the years ahead.
That he needs to help business grow is clear with economic growth only 0.8% this year and only a projected 2% growth next year. This is down from, the 2.1% he said in November.
But the real political nub of the budget was the controversial decision to cut the 50p top rate of income tax for those earning more than £150,000 a year. Although he maintains that the money lost by lowering the top is clawed back rate by clobbering buyers of £2m homes with a new 7% band of stamp duty.
Now this gives Mr Miliband a very useful stick to beat with which to beat the government. He was quick off the mark to accuse it of being a "millionaires' budget.”
His performance was his most effective to date, mind you with the coalition government having leaked so much of the contents he was given plenty of material to prepare his attack.
So the usually opposition cliches came out. The budget was "unfair, out of touch, for the few not the many" and was based on the "wrong choices, wrong priorities, wrong values" from the "same old Tories".
But the cut in Corporation tax gave him the open goal to aim at. He was able to point out that most top earners would be "totally unaffected" by the rise in stamp duty because only around 4,000 homes worth more than £2m are sold each year.
As for Wales an enhanced capital allowance for the Deeside Enterprise Zone and ultra-fast broadband for Cardiff don’t amount to the kind of boost that the Welsh economy need. Hardly enough to compensate for the threat to pay in the public sector that the Chancellor is threatening with regional pay.
The UK Government also promise to work with the Welsh Government to consider the electrification of the Cardiff Valley rail lines now this would give a much needed boost to the economy if it was to be agreed and started up soon.
Meanwhile Plaid Cymru's new leader Leanne Wood AM has announced the formation of an Economic Commission which will develop the party’s vision for the Welsh Economy over the coming decades. And guess who’s to chair it?The former Plaid Cymru MP Adam Price and one of Leanne Wood's major backers.
Final thoughts on the budget. The chancellor will have become the darling of his party by delivering a tax cut. His chances of being the next leader should Mr Cameron leave the stage are greatly enhanced. Tory chancellor’s who deliver tax cuts always win the hearts of party members.
But he will not win the hearts of the country if Miliband’s attack sticks. For the country is hardly likely to reward him if he’s seen as only helping his chums the rich.