In this Budget, George Osborne had two objectives which were hard to reconcile. There is an Election to win, in 50 days time. There is also the country’s fiscal position. Despite significant improvements over the course of the Parliament, the Government is still borrowing over 5% of the GDP. Given that the economy is now growing healthily, Keynes himself might have regarded that as an excessive stimulus. The Chancellor has often condemned the last government for failing to fix the roof while the sun was shining, and insists that he would never repeat their mistake. Today, the markets would have been watching him, to see whether he would keep his word. He did.
If Mr Osborne were writing tomorrow’s headlines, he would be happy for them to diverge. For the serious papers, “Steady as she goes: no backsliding on fiscal responsibility”. There, he will probably succeed. For the mass-market end, it would be “Good Old George’s give-aways.” That is more problematic. A penny off a pint of beer will help a bit, as will the higher tax thresholds. But for sheer political sex appeal, nothing beats a straightforward cut in income-tax rates. Although the Liberals would probably have vetoed such a move, It may be that Mr Osborne himself would not have been enthusiastic. Such a cut might have contradicted his essential message: that the deficit must take priority. But some Tory MPs with Thatcherite instincts and marginal seats would have preferred a bolder approach and a stronger message (though we must remember that the Lady was always opposed to unfunded tax cuts).
As it is, they will have to make do with a small-print Budget. There is indeed a great amount of detail, which will take time to decode. There is one advantage of a long innings at the Treasury, by a Chancellor who retains his elan vital. After five years, he will have learned how everything works: which levers to pull; what effect they will have. This Budget could only have been produced by a perfectly-sighted Chancellor.
That said, there could be a drawback. At first sight, it might seem that George Osborne was falling into one of Gordon Brown’s favourite errors: obsessive micro-management. Mr Brown seemed to believe that if he tried hard enough, he could tailor the tax regime to suit the individual circumstances of every firm: indeed, of every tax-payer. The result was finance bills of fiendish complexity plus contented tax accountants.
Mr Osborne’s people insist that there is a crucial difference. Gordon Brown wanted to substitute his judgment for the benign operations of the supply-side and the animal spirits of the entrepreneurially-minded. By removing constraints and providing judicious incentives, this budget is working with the grain: encouraging the very supply-side forces which have created the recovery.
It is a powerful case and it may well triumph. But only on one condition: that the Tories win the Election.
This raises the basic question, which is political rather than economic. Mr Osborne had little cash to deploy. Yet he did have words. Were they strong enough? He was impressive when talking about the new Northern power-house and the recent successes in British manufacturing. But those points ought to have been made more strongly, with historical context, grander language – and at greater length. Mr Osborne feels passionately about the revival of the North, and some of that did come across in the speech. But there could have been more, with an eloquence which transcended partisanship. I suspect, however, that he will return to those themes over the next few weeks.
He will also return to the biggest theme of all, which made several appearances in his text. Five years ago, Britain was on the verge of economic catastrophe. Deficit out of control, confidence crumbling, a recession which threatened living standards and employment levels; the whole country in the grip of gloom and foreboding. Now, we are on the verge of recovery. Problems remain: soluble ones. If the country sticks to its course, the British people will be able to enjoy the rewards. But if we slide back down to the valley of the shadow of recession, all the efforts and all the sacrifices will have been wasted.
That is the Tories’ central message, and it was implicit in the Budget. Perhaps it should have been more explicit.