Three Budget Thoughts
I’ve got some Budget reaction going up at False Economy today.
Three other points, which didn’t seem right for there:
– I claimed on Monday that ‘the wrong sort of inflation’ couldn’t explain ‘significantly’ higher borrowing. I’m pleased to say the OBR agrees. Table 4.18 tells us that higher inflation is adding £5bn to social security bills over the period, table 4.19 reveals that it will add £1.8bn to tax credits, 4.20 gives a figure of £1.6bn on public sector pensions and 4.21 shows £3.3bn on debt interest payments – for a ‘wrong sort of inflation’ figure of £11.7bn. Against borrowing revised higher by nearly £45bn.
– I rather suspect that the macro impact of yesterday’s Portuguese Budget, which was defeated driving Portugal closer to an EU ‘bail out’ will be somewhat larger than the UK Budget.
– Finally, given that the OBR says the corporation tax cut will have ‘minimal impact’, I’m rather annoyed at the media giving a free ride to business leaders welcoming the tax cut and saying what a good thing it is.
If Osborne wanted to spend £1bn to increase growth there are much better ways to do this (higher public investment for a start) – of course this wouldn’t have gotten him the heads of the CBI, IoD and BCC praising him anywhere near as much today. A political rather than an economic policy.