“The Chancellor has delivered a circumspect budget, consistent with the policy of balancing the books in the public finances. Some giveaways on taxation were balanced by increases in taxation elsewhere. In broad terms this budget will have little or no impact on growth in the next year or so.
“Prominent in the budget speech were revised growth forecasts which are stronger than was the case last year. This reflects higher than expected growth over the last year and has positive implications for closing the gap in the public finances, as more economic activity means higher tax revenue.
“Unemployment has also continued to fall. Why has this happened despite the Chancellor’s continued austerity? In part, there has been a return of consumer confidence as the stock market and house prices have risen, reinforced by release of pent up demand from the household sector after several years of belt tightening. In part, it reflects the effects of low interest rates and issue of money (so-called quantitative easing) by the Bank of England.
“There is a definite whiff of a pending election in the detail of the Budget measures.
“Trumpeting of higher growth forecasts is but one element. There were several measures announced to help pensioners and savers, many of whom are also pensioners, an increasingly important constituency in general elections. Greater flexibility has been given to pensioners on how they use the money they have accumulated in their pension schemes, particularly the ability to take cash as a lump sum from their pension pot.
“Savers were also helped by the introduction of a new tax ISA with a £15,000 annual limit. A £7bn package to reduce energy bills, a key factor squeezing household budgets and company cash flows in recent years, was also announced.
“Other populist measures included cuts to beer duty and bingo tax, the freezing of duty on beer and cider, the scrapping of a planned rise in fuel duty in September and extra spending for flood defences and fixing potholes.
“On the austerity front, the Chancellor announced a freeze on welfare benefits for the next tax year and duty on cigarettes to rise at 2% above inflation.
“In summary, a neutral budget from the viewpoint of economic growth, but with particular winners and losers.”