THE UK is 'walking tall again,' claimed George Osborne as he stood at the dispatch box delivering Wednesday's Budget.
That reference could just as easily have referred to his own position as a Chancellor who, despite missing his fair share of deficit reduction targets and making a few memorable blunders over the last five years (remember the 'pasty tax?') now goes into May's general election on the front foot.
The forthcoming electoral battle will not be decided in Scotland, where the SNP are forecast to make major gains and the Tories are unlikely to make much if any headway on their single seat, but in a handful of English constituencies where Conservatives will battle mainly Labour and UKIP for the hearts and minds of the voters.
Is this Budget likely to achieve the desired result for Mr Osborne and his party?
Judging from the view of the business community, which is essential in the aftermath of any Budget as it represents the people who create jobs and wealth to support important social services, the Chancellor has delivered a sound if not flawless Budget.
The Scottish Chambers of Commerce called it a 'good Budget for Scottish business,' albeit with room for 'considerable improvement' and welcomed the £1.3bn in tax breaks and other measures of support for the UK oil and gas industry as a 'fresh approach to the North Sea fiscal regime.' The Institute of Directors Scotland welcomed the move to allow farmers to assess their income tax over five years earnings, the cancellation of the fuel duty rise and the plans to sell off stakes in Lloyds and other financial institutions as measures that will have a 'significant and positive impact on the private sector,' while the Federation for Small Business voiced its members' concerns about the slow pace of the recovery but welcomed the digitisation of tax returns as an efficiency move that would benefit business owners and the self-employed.
As with any Budget there were winners and losers. While the Chancellor made a great play on the fact that the richest are making the biggest contribution in addressing the deficit and made a point of targeting banks and some multinationals through the so-called 'Google Tax.' There are, however, many at the other end of the spectrum who are feeling extreme pain from benefit cuts and the wider spending squeeze on public services. Ed Miliband's comment about the gap between the rhetoric and the reality of The Chancellor's assessment of the UK economy had this audience very much in mind.
Putting the critics to one side and stepping back from the criticism of Mr Osborne's clever manipulation of the deficit figures in his presentation of the Budget, there are bigger issues at play that will give him confidence. Unemployment has fallen from eight per cent when the Coalition Government took over to 5.7 per cent, its lowest level in six years; the forecasts for 2.5 per cent economic growth this year and for an increase in business investment of 5.1 per cent in 2015 and 7.5 per cent in 2016 are a significant achievement set against the performance of Eurozone and many other international jurisdictions.
Meanwhile the Chancellor's commitment to taking tough measures to reduce public sector spending and cut the deficit have found favour with respected international organisations like the OECD which hailed Britain's economic performance, saying the country "has a long term economic plan, but it needs to stick with it."
Labour have made much of their differences on spending cuts but in reality the difference between the parties is now circa £20bn which is immaterial in the context of total government debt which will be in excess of £1,500bn before we reach our first balanced budget in 2019, the first since 2002. Nevertheless it remains to be seen how this actual and perceived difference between the parties in tackling the deficit plays out with the electorate.
The improved economic data and sentiment will give the Conservative Party hope for a victory in the general election, however, the key question is whether voters will think the success of the economy is because of Mr Osborne or in spite of him. While his final Budget of this government has initially played well within the Scottish and UK business community the verdict of the wider electorate on 7 May is another matter and one which will determine whether he is the comeback kid or yesterday's man.
Mark Houston is Glasgow Managing Partner for accountancy and business advisory firm Johnston Carmichael
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