“This will be a Budget to secure the recovery, tackle borrowing and invest in our industrial future” was how the Chancellor, Alistair Darling summed up the last Budget before the next general election.
It was also a fair summary of the problems he, and the country, face. On the one hand a need to reduce a ballooning deficit and on the other a need to nurture an economic recuperation from one of the worst downturns in generations.
Mr Darling was partially buoyed by figures revealing that government borrowing will not be quite as mountainous as earlier predicted: for this year £167 billion, £11 billion down on previous estimates. For future years, the Chancellor predicted borrowing would stand at £163 billion in 2011, £131 billion in 2011/2012 and £110 billion in 2013/14, before reaching £74 billion in 2014/15. But he also pruned his growth forecast for next year, down to between 3 per cent and 3.5 per cent.
The Budget debate was always likely to be dominated by the question of when to cut spending and by how much.
As expected, Mr Darling held back from implementing swingeing spending cuts this year. “I believe that to start cutting now risks derailing the recovery,” he said. Although he did promise more drastic action in the spending settlement for the years after 2011. As many believe, it will be the fiscal decisions taken over the next year that will have the weightiest bearing on the economy.
Not heavily loaded with new announcements – most tax measures had been set out in the pre-Budget Report last year – the Budget did, however, offer one eye-catching change: the decision to raise the stamp duty threshold for first-time buyers to £250,000. A rise that is to be funded by an increase in the stamp duty charge for homes worth £1 million to 5 per cent.
There were, though, a number of announcements designed to help long suffering smaller businesses. The annual investment allowance is doubling to £100,000; business rates’ relief will effectively scrap rates bills for 345,000 firms for a year; entrepreneurs will benefit from a raising of the threshold for reduced relief on capital gains tax; and the fuel duty increase is to be staggered, with a penny rise in April and October and the remainder in January 2011.
NICs, however, will still be climbing by 1 per cent as from April 2011 to the disappointment of many.
Business funding came under the spotlight too. The partly state-owned banks will have a duty to boost their lending to small firms in particular, and a new national investment corporation will be streamlining investment and financial help for SMEs.
The full extent of the spending cuts that are necessary to address the deficit may still be in the future. The exact rate of GDP growth lies ahead too. How far the Budget goes towards securing the recovery, tackling borrowing and investing in industry, time also will tell.