Last year's Budget was the worst since Gordon Brown's 10p tax debacle.
We assumed this year that George Osborne didn't have much room for manoeuvre but it turned out he had a fair amount of leeway and he used it. I suspect his party, at least, will like it.
Here is my summary.
Personal allowance will be raised to £10,000 by 2015 (total cost around a billion).
All businesses will be freed of the first £2,000 of their National Insurance bill (cost £1.7 billion). They say this will mean 450,000 businesses will now pay no NIC at all.
The fuel duty rise in September will be cancelled (roughly another billion).
Beer duty will be cut by 1p a pint (instead of being automatically increased, as it usually is).
Corporation Tax to be cut by another 1% by 2015.
Another year of public sector pay rises being capped at 1% (current restraint extended to 2015).
A slight change in the Bank of England's remit. Inflation target will still be 2%, but the Governor will have more latitude to "communicate mitigating factors." It is all a bit convoluted, but would give the new Governor the chance to say, for example, that he isn't going to increase interest rates for the next three years. This strikes me as one of the most important aspects of the budget and might give consumers and businesses more peace of mind when they borrow money.
Housing; the current first buy scheme extended (an extra three and a half billion over three years) and mortgage guarantee scheme expanded by £12 billion. They claim the latter will help 190,000 people buy homes.
Equitable life customers who bought a with profits annuity before September 1 1992 will get a compensation payment of up to £5,000.
HOW IT IS PAID FOR
Mostly through the very substantial savings already announced in the abolition of the second state pension.
But there are quite significant sums coming from a further crack down on tax avoidance (Jersey etc). Accountants who market aggressive schemes are now also to be "named and shamed."
There will be a further billion and half pounds of new spending reductions next year, but this will be switched to capital spending (see above; housing etc).
This is also complicated by the fact that Whitehall under-spent by a staggering £11 billion this year (which has saved their bacon on borrowing) so the truth is that the headline is probably worse than the reality.
But we have to set all this in the context of a very gloomy overall picture.
In the first column below are budget predictions and in the second those that were put out in the Autumn Statement. You can see things have got quite a lot worse.
GROWTH (from 2012)
0.2% / -0.1%
0.6% / 1.2%
1.8% / 2.1%
2.3% / 2.3%
2.7% / 2.7%
2.8% / 2.8%
The weak last quarter of last year has really taken some steam out of the economy, but they claim a lot of the loss of output is due to the fall in exports.
The projection is for growth in the first quarter of this year to be 0.1%, so officially no triple dip (we'll see).
INFLATION (from 2013)
2.8% / 2.5%
2.4% / 2.2%
2.1% / 2%
2% / 2%
2% / 2%
Unemployment is expected to peak at 8% not 8.2%.
BORROWING (from 2011)
121 / 121
114 / 109
108 / 99
97 / 88
87 / 73
61 / 49
42 / 31
So £60 billion more than last forecast over the period, but remember they have changed the way of calculating it to include the income from QE coupons. If you strip these out, you see that they are only just managing to get borrowing to fall in the early years (from 2011/12);
On debt, they have just announced that meeting the target that it should fall as a percentage of GDP will be put back another year (and remember they delayed it in the Autumn Statement as well). At this rate, we will never meet it…
DEBT (from 2012/13)
75.9% / 74.7%
79.2% / 76.8%
82.6% / 79%
85.1% / 79.9%
85.6% / 79.2%
84.8% / 77.3%
What all this means is that our economy is still very, very sick.
These figures have been downgraded every six months for years. No wonder he took a penny off the cost of a pint…
One last point; the Treasury did something quite cute this year, which is to work out that most departments spend most of their money in the last two months of the financial year.
They basically cracked down on this and stopped the end of year splurges (very Yes, Minister) and that is why they managed to force an £11 billion underspend.
This has saved their bacon on borrowing and given them more leeway to switch money to capital spending.
We will, of course, have to await a proper assessment of the detail and fine print, but this is how it looks so far…