Budget 2013: Osborne will ignore the call for change in economic policy

Monday 18 March 2013

Robin Shannan from McClure Naismith on what he expects George Osborne to announce in this year's budget.

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It has been a long time if ever, since the nation wanted, as opposed to expected, so much from a budget when a chancellor has so little room for manoeuvre at such a crucial time for the UK economy.

Politically it is clear Mr Osborne will not change the overall thrust of the Government's austerity policy or the aim of cutting the structural deficit (even if the target for achieving is likely to be lengthened). Mr Osborne will ignore the now quite wide range of opinion that is advocating at least some change in economic policy. But there is one thing that all sides of the debate can agree on. That one of the best things that the budget can achieve is growth. In my view one of the best ways to do this is get cash into the hands of consumers, but it is hard to see this happening to a great extent without a radical change in policy such as seriously think about "helicopter money". I expect only some tinkering with personal taxation where it can be done without causing direct further borrowing. I also expect infrastructure projects to feature. So what else might he do? Some more incentives to encourage entrepreneurs but I do not expect the radical changes to capital gains tax advocated by some. There may be some attempt to encourage SME's to employ more people, but given the under productivity I find it hard to imagine Mr Osborne will come up with anything radical enough to make a huge difference here. I can see some money being made available to encourage exports so that business can take full advantage of the decline in sterling. Other options I think the Chancellor will at least consider is looking to the USA and see if we can learn how to change our way of Quantative Easing to make it more effective. At the moment it mainly helps the banking sector. With a new Governor of the Bank of England due to start shortly, Mr Osborne may consider adding to the Bank's targets over and above inflation eg. employment. Given the PR disaster of last year's budget, politically Mr Osborne will want a safe budget and I do not think we should be looking for much "wow" factor. But I do think he will want his budget to be one that while still very much seen as treating debt reduction seriously will also be doing something meaningful to create growth. After all, a key part of Moody's decision to downgrade from triple A was the unpromising prospects for anything but low to flat growth for the UK in the next few years. It will be interesting to see the reaction of the Office of Budget Responsibility, the IMF and the OECD and whether an increase in their UK growth projections will follow. Robin Shannan will be speaking at The Herald Sunday Herald Post-Budget Briefing on Thursday, March 21 at The Lighthouse, Mitchell Lane, Glasgow. The event is free to attend and you can apply for tickets by visiting www.herald-events.com/budget or calling 0141 302 7319.

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Budget 2013: Osborne will ignore the call for change in economic policy

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