The count-yourself-lucky Budget
"It's bad, but not as bad as we thought - and not nearly as bad as it would have been under the Conservatives." Strip away the distractions and the gimmicks, and that was basically what the chancellor wanted to tell us in his Budget statement today.
There's no getting away from the depth of this recession. But on some key measures - especially unemployment, but also the number of house repossessions, and the number of companies going bust - it's been much less bad than the headline 6% drop in output would have led you to expect. It will have given the chancellor great pleasure to point out that the claimant count is still lower than it was in 1997. The way he told it, all of those upside surprises are down to Labour policies.
Never mind that companies themselves came into this recession with stronger balance sheets than in past recessions. Never mind that the independent Bank of England cut interest rates further, and earlier than in any past downturn. Never mind that millions of people across the country have accepted steep cuts in their earnings in order to stay in their jobs - or take a new one.
Tax credits, the time to pay scheme for companies and the government's extra investment in job centres have all helped. But it goes without saying that they are far from the whole story. Yet, whether or not it can take credit for this better outcome, the government did today reap the benefits, in the first significant downward revision in the government's borrowing forecasts for at least a decade.
We can all be glad that public sector net debt will be £67bn lower in 2014-15 than he thought in December. That's £67bn down - only £1406bn to go.
As I mentioned earlier, by 2014-15, the structural on the public finances is now expected to be 2.5% of GDP, instead of 3.1%. A small part of that - just 0.1 percentage points - comes from measures announced today, notably the rise in stamp duty on houses worth over £1m. You'll note that the tax rise is permanent, whereas the tax cut for first-time buyers only lasts two years. The rest of the improvement in the structural deficit comes through more benign forecasts for spending and revenues.
The City will see that two-thirds of that improvement has fed through into lower borrowing overall in 2014-15. The City reaction to this Budget was muted today - my hunch is that will stick. This is not like the PBR, when the City saw the downside the following day. The forecast for gilt issuance next year is exactly what the City analysts were expecting.
Fitch, the ratings agency, has given a muted welcome to the Budget, though it has warned that the public finances are still vulnerable to shifts in confidence down the road. Here's what one of its economists has said:
"The lower than expected outturn for borrowing in 2009-10 is welcome, particularly in the face of weaker than expected economic growth. There has been some restoration of government's fiscal forecasting credibility following several years of deficit overshoots even before the recession. New measures to support the economy appear, by and large, to be funded by spending cuts elsewhere, or from bonus tax receipts, with the majority of the £11bn tax windfall devoted, appropriately, to lower borrowing."
Politically, he's delivered a very small net giveaway of £1.5bn for 2010-11, which gets clawed back in future years. Others will judge whether the mix of measures he's announced will do Labour any good. As I said earlier, they have clearly been chosen with Conservative discomfort in mind. But when you're borrowing £167bn, that £1.5bn figure looks like pretty small beer.
But for me the most interesting point about this Budget is what it says about Labour's strategy for re-balancing the economy. I haven't been able to go through all the numbers, but it looks to me as though that re-balancing has been rather put on hold. Growth in private investment as a share of the economy has been revised down for next year and 2012. Along with the measures to support business, he's announced new measures to boost the housing market - and consumption.
It's helpful to the Treasury in the short-term if the economy isn't going to re-balance after all: given the way the tax system is structured, it brings in a lot more in tax revenues from an economy that's "excessively dependent" on the City, property and consumption than one built on exports and investment. If the Treasury now thinks we'll see less re-balancing, in the next few years, that could explain the greater optimism on tax revenues and structural borrowing. But that short-term good news for the chancellor could still be bad news for the economy long term.