UK: A Budget for Detail

There are three elements to George Osborne’s second budget, the budget document itself, The Plan for Growth and the Office for Budget Responsibility’s Economic and fiscal outlook. All three, and supporting documentation, can be accessed here and here.

What can one say amid all the reams of analysis? Politically it looked quite astute. Fuel prices are a toxic political issue and both canceling the planned 5p petrol duty rise and going further with a 1p cut was smart. Unless oil prices fall below $75 a barrel the fuel duty escalator won’t be reactivated in this parliament. North Sea companies, who are paying for the chancellor’s largesse, will of course hate it.

The other household-friendly measure was the promise to go further towards the target of a personal tax allowance of £10,000, with an increase to £8,105 from April next year. There will be a corresponding increase in the higher rate threshold to avoid more taxpayers being dragged into the higher rate net.

For business, apart from North Sea oil companies who will pay for the fuel duty concessions, there was quite a lot, notably the new aim of getting corporation tax down to 23%, lifting lifetime entrepreneurs’ relief to £10m, and the creation of 21 (as opposed to the expected 10) enterprise zones.

The growth forecasts from the Office for Budget Responsibility will be criticised for being optimistic, though not excessively so. The OBR needs a growth bounce of 0.8% in the first quarter to achieve its prediction of 1.7% this year. Next year it has 2.5%, followed by 2.9% in both 2013 and 2014. There will be debate about that, particularly as high inflation has forced up its medium-term borrowing numbers.

Originally published at David Smith’s EconomicsUK and reproduced here with permission.