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 79.

    After the next election all the London based parties have said the squeeze is going to get worse . With the rapid reduction in services around the country by local councils , more rapid in Wales , you must ask the question are the main parties Con Lab Lib up to the task ?
    At least in Wales and Scotland we have credible alternatives .

  • rate this

    Comment number 78.

    63.musictechguy "People voted in a government who historically and ideologically encourage and intensify wealth inequality"

    But they didn't get voted in, the tories seized power. I have no argument about what you're going to get under the tories, we all knew what was going to happen but some people still voted for them knowing they were going to be adversely affected by their policies.

  • rate this

    Comment number 77.

    AfA @64
    "Imagine running an army"

    Minus 5 awarded, and that just for the 'left-leaning' Labour prescription!

    It is only embarrassment (within the family, with softer-hearted children or spouse) that holds back Tory wealth-concentration, the 'natural' flow of money and power to the clever and well-armed. In a spectrum of income inequality, all are made Quislings of Mammon. Ruled by fear & greed.

  • rate this

    Comment number 76.

    a. Top 1-2% - pay rises of 35%+
    b. Middle Income: pay rises < 2%
    c. Lower Income: practically static

    Couple that with a cost of living rise of at least 25% [since 2008], and then tell me we are having a recovery...

    More governmental "inexactitudes" - or lies, to you and me

  • rate this

    Comment number 75.


    Actually Auntie Left the last government was not any more incompetent than the present useless shower

    That's the funniest thing I've read on "Have Your Say" for a long time...

  • rate this

    Comment number 74.

    good news on the job front, another 63,000 taxpayers actively contributing to the economy.
    Interesting point made about the top rate of tax - if it had kept pace with wages over the last 25yrs it would now kick in at £75k per annum instead of the current £41k.
    Time too help the middle class and raise the threshold for higher rate tax

  • rate this

    Comment number 73.

    We are all taxed too much (even the rich when they pay) and the government spends too much.
    It's our money, not theirs.
    Raise the threshold, simplify the system and do something for savers, they've been bled enough.
    And stop dripping on about austerity; it's insulting to us who lived in real austerity in the '40s. We still paid our way and provided a better life for the next generations.

  • rate this

    Comment number 72.

    66. The public sector has failed this country. The public sector has become a private members club who put the benefits of their employees before and above anything else. Strong unions and huge pay offs, falling and failing standards even at the sacred cow NHS. Socialism is over and should be left in the 20th century.

  • rate this

    Comment number 71.

    I wonder whether Osbourne has instructed OBVIOUS "over the horizon" precautions.

    ie the timing to bring home the Rhine army or damaging economic effects of any of Putins yet unknown "consequences".

    Then theres the outcome of Scots independence, which could simply set remainder of UK back another 5 to 10 years

    Big problem for Osbourne & UK economy is impending possible damaging negatives

  • rate this

    Comment number 70.

    I think you'll get what you want. Pretty difficult to give a UK tax break to a UK company that doesn't pay tax or to a non-UK company paying foreign tax.

    You're not in charge of anything are you?
    You're not quite back on form after your recent absence. Talk is of Budget help for business with energy costs. It IS POSSIBLE that it may be tied to CT payments but may not be.

  • rate this

    Comment number 69.

    48.Will "Blair and Brown bankrupted the economy during the good times." No Will, during the good times the bit that they had control over was slightly better than that inherited from the Tories. There was a world crisis in 2008 and bailing out RBS and Lloyds caused the UK's massive deficit. Your understanding of the situation is coloured by the oft repeated message from the Tories and the press.

  • rate this

    Comment number 68.

    Actually Auntie Left the last government was not any more incompetent than the present useless shower. At least they cared about ALL the people not just the rich fat cats and bankers and did not leave people unable to eat! You may also recall it was the last Tory Government that presided over a massive rise in house repossessions and the one before that that sold off all the family silver.

  • rate this

    Comment number 67.

    see the unemployment figures just been released just in time for the budget my god london and the se are doing well

  • rate this

    Comment number 66.

    60.AuntieLeft - It would be very naive to think we are out of the woods
    The huge mess the last incompetent 'government' left us with will take many more years to sort out.

    Correct. Especially as the coalitions borrowing (in real terms) has exceeded that of 10 years of the previous lot. 'Austerity' has essentially enabled the biggest transfer of wealth from public purses to private we've seen

  • rate this

    Comment number 65.


    This is not austerity - this is reality.

    Tell me honestly, do you "lift" all your comments from the front page of the Daily Mail? its just that I seem to hear the same tired repetitive nonsense parroted by the gutter press.

  • rate this

    Comment number 64.

    dr g @50
    "low wages"
    Low benefits
    Next income NIL

    Imagine running an army thus, the cultivation of unemployability, random selection for low pay, incentives at first affordable for more military police, eventually having to borrow to pay for martial law, wondering why 'investors' put-off?

    No word yet of democracy, all incentivised in equal partnership, even the investment managers, 'ours'

  • rate this

    Comment number 63.

    There is no recovery for the middle classes.

    People voted in a government who historically and ideologically encourage and intensify wealth inequality. The top 1% get to see the recovery in the form of tax-payer bailouts and multi-million pound bonuses while the middle classes see their wages fall below inflation, effectively making them worse off.

  • rate this

    Comment number 62.

    Robert, don't forget the economy forecast was halved a year ago so anything looks good now. People are still fighting over reduced food in shops, jobcentre staff are bullied into removing people from benefits at any cost (suspension), people's wages are frozen at best yet MPs get 11%, the national debt has not been reduced and borrowing is up. It's all smoke and mirrors before the election.

  • rate this

    Comment number 61.

    39.A Devastated Planet

    I bet there's nothing in there about... the fact that the planet cannot sustain the current human population ?

    Probably because that's all a lot of rubbish perpetrated by the media. I guess you missed Professor Hans Roslings excellent programme about that very topic...


  • rate this

    Comment number 60.

    It would be very naive to think we are out of the woods
    The huge mess the last incompetent 'government' left us with will take many more years to sort out.
    Austerity for at least another five years with bigger cuts to the public sector. The recovery means money is now coming in to sort out our finances which were destroyed by la la Labour and their Magic Money Tree fiscal policies
    Fiscal Fools


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