A recovery yet to pay dividends

George Osborne Mr Osborne wants to see businesses investing more

We know the framework for today's Budget.

The big thing (and the disappointing news) is that the recovery in the economy is not - in the government's view - leading to an unexpectedly fast rise in sustainable tax revenues or sustainably lower benefits for the unemployed.

So the Office for Budget Responsibility's estimate of the so-called structural deficit - the part of the government's deficit that is left when the economy is operating at full capacity again - is not expected to be reduced.

In fact it might even be increased a bit.

Which means there will be no let up in blinkin' austerity. Them tough times in the public sector are not going away any time soon.

Which doesn't mean that the chancellor has no money to play with in the Budget - only that for every giveaway, he'll find a way of taking money back.

We also know the big stuff he wants to achieve in the Budget, because he said what that was in Hong Kong (of all places) earlier this year.

In a speech, he conceded that the recovery is not balanced, that it is too dependent on household investment: he wants to see businesses investing more, and he wants to do what he can (which is probably not a great deal) to help narrow the gap between what we export as a nation and what we import.

So there will be measures to tackle both of these economic weaknesses.

What would they be?

Well I would expect more generous tax breaks for companies that invest in expanding productive capacity.

And I would imagine there will be an improvement in the government scheme for helping companies export, or UK Export Finance (I am not an expert on this, but as I understand it, German exporters receive more generous and flexible support - and that does not appear to have done the German economy any harm).

What else? Well there will be a reduction in the tax paid to the Treasury by electricity generators for emitting carbon dioxide (in the jargon, the Carbon Price Floor will be cut) - which should help a bit with energy bills, especially for manufacturers that consume vast amounts of electricity.

Of course we already know how the chancellor intends to at least maintain the current higher rate at which houses are being built, because he announced at the weekend that the mortgage guarantee scheme for purchases of new homes, Help to Buy One, will be extended to 2020.

Finally there will, I am told, be an eye-catching measure that is likely to dominate the headlines.

I expect it to be in the territory of personal taxation. I am told the Treasury thinks it is jolly clever.

But more than that I know nothing. Sorry.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 439.

    North Sea Oil revenue was squandered in 1980's by Thatcher Govt on funding cruise Misiles agaianst a phantom enemy. Then she armed the Mujahadeed (modeembryonic Taliban) to destabilise all USSR's neighbours with islamic fundamentalism. What a well thought out policy that was ..NOT.

  • Comment number 438.

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  • rate this

    Comment number 437.

    410. therealist
    How about just being happy you're in a job and with an improving outlook you may just keep that job.
    Is this what we have been beaten down to? Just be happy it's not worse? Those at the top screwed up the economy and used our money to shore up the system in order to protect their own wealth. Now they'll throw loose change from the balcony and the sycophants will clap and cheer.

  • rate this

    Comment number 436.

    What a load of rubbish from a greedy arrogant wet nappy spoilt little brat greedy greedy rich people
    What about the lowest paid workers this is only just starting to show effects no money more shops will be closing just wait and see sainsburys has just started to get the effects low pay low staff levels already in some shops who is getting rich only the richest

  • rate this

    Comment number 435.

    Our economy is already resilient. What Osborne seeks to do is force a change that 'market forces' neither want nor will pay for.


Comments 5 of 439



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