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This budget has done nothing to bring back the ‘feel-good’ factor | Politics News


We’ll get to the economics in a moment, but first think about what’s probably the most remarkable thing about this budget. That’s pretty much a “normal” budget – the first “normal” budget in three years.

Think about it: first, there’s COVID, in which the usual rules of economic policymaking are removed. The huge gifts (most obviously the salary increase plan) come quickly, with a few numbers and no red book.

Then there’s Liz Truss’s amazingly small budget and Jeremy Hunt’s equally surreal fall statement, which essentially demolishes everything that came before.

Put it all together and we don’t have anything quite like conventional fiscal policy yet – that is, six sets of strategic tax and spending changes every month with powerful, detailed economic analysis – in a long time. If today’s event feels a bit boring, that’s partly because what happened before was so intense.

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The overall picture of the UK economy is slightly better than last time around.

That sounds encouraging, until you recall that last time’s outlook was bleak: the worst two years for household disposable income on a modern record; A squeeze in the cost of living, plus some tax hikes as the government looks to fix its small budget mayhem.

GDP forecast from the Budget

On the basis of current budgets, the UK will be almost out of a technical recession (two consecutive quarters of contraction), but will do a bit more than a straight line for most of this year.

Household disposable income won’t fall as much as expected over the previous period, but this year and next will still be the worst years for households’ finances at least since the last years. 1950. Things are getting better, but still bad.

Nor is there much indication that the measures included in today’s budgets will change the dial as much. In a way, this is a bit strange since many of the measures here could be considered “pro-growth” in a textbook.

There is an increase in the provision of childcare, which will help encourage more young parents to return to the workforce. The increase in the lifetime pension will help encourage well-off older workers to return to work.

Read more:
Budget news – live: Have we seen ‘gifting to the rich’?
Main attractions

Total fiscal impact of Budget measures

Then there’s the biggest measure of all – full spending, whereby businesses can recoup their investments on their tax bills. This is exactly the policy that business groups have been calling for for years, claiming it will boost investment and thus productivity.

However, taking all of these measures together and, according to the Office for Budget Responsibility, they increase the rate of economic growth to about 0.3% at its peak, before tapering to zero.

Part of the reason is that some of these policies are time-limited — most notably, full spending is technically only valid for three years. Treasury says they want it to be permanent, just that at the moment they can’t afford it.

It must be said that it is not due to any particular restriction on the ability to spend but due to its self-imposed financial rules, which are much less restrictive than you might imagine. .

Either way, the end result is that OBR thinks the boost to growth resulting from all these efforts is rather small.

On the other hand, OBR forecasts are significantly more optimistic than those of the Bank of England, which argue that far from a quick recovery, the UK is likely to see economic growth unchanged in the near future. years to come, barely earning any of the income lost in recent years.

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Key moments from Jeremy Hunt’s first budget

Put it all together and it’s hard not to conclude that this is primarily a technical budget.

There’s the little things in there for households – maintaining a £2,500 energy price guarantee, childcare provisions and a pension tax-free allowance (mainly for the better-off). ) – but it’s hard to see how this could possibly solve the massive financial crisis most households will face in the coming months.

Lifetime pension

They will see inflation continue to escalate, they will feel the impact of higher interest rates, and they will see most of their income go into the treasury (due to the freeze on personal benefits). tax-exempt employees announced last fall).

It is the opposite of the “feel-good factor” – the factor of feeling bad.

And the budget did nothing to remedy this. It has done nothing to fix the problems young people have when trying to climb the housing ladder. It does nothing to provide a coherent response to Joe Biden’s Inflation Reduction Act.

On the other hand, there are still two major financial events before the likely date of the next election, late next year. If there is a waste coming, it is likely to happen.

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