The Budget

Published on Fri 14th Mar 2008

The budget last week was my fifth shadowing the Chancellor. It was unquestionably the gloomiest, and also the worst delivered: evasive, tedious, full of padding.

The economy is in trouble. There is a shortage of credit stemming from the collapse of confidence in financial markets, starting in the US. We also have a home grown problem: too much household debt, mainly mortgages which have soared in value because of the house price boom. Yet that boom has burst and house prices are now falling. This could be good news for first time buyers. But it is worrying for people with big mortgages and affects overall confidence. Meanwhile inflation has soared for essential items like heating, food and transport making it harder for the Bank of England to cut interest rates.

The government is much more optimistic than independent forecasters some of whom expect a recession. The government's problem is that it has little freedom of manoeuvre. It cannot stimulate the economy since its budget is already up against its own limits of prudent behaviour. The strategy is to hope for the best.

I thought it was sensible to raise alcohol duties. Binge drinking needs other solutions including more late night policing, tougher controls over off license sales and withdrawal of licenses for undisciplined drinks chains. But higher prices will discourage heavy drinking. Vehicle and fuel taxation is also a legitimate way to change behaviour provided the money comes back to tax payers in tax cuts elsewhere. The government seems very half hearted about the environment; the Chancellor talked about catastrophe and the urgent action needed; then postponed his own measures.

The truth is however that the Chancellor did very little (either good or ill): a neutral budget delivered without style.