Once again the Chancellor Philip Hammond has dusted of his joke book. When he got down to the serious stuff, there was a change in tactics, releasing some money to certain key areas and longer term not looking to ensure future budgets balance the books. It seems balancing the books is off the agenda for several years, if the current Chancellor continues to work at number 11.

The Prime Minister Teresa May and the Chancellor do disagree on austerity. The "era of austerity is finally coming to an end" is not quite the same as "austerity is over"

The cost of ending austerity depends on how you define it - stopping further per capita cuts in day-to-day departmental spending from next year will cost £26.3bn by 2022-23.

With regards to the deficit, the deficit is estimated to increase next year before reducing over the preceding years.

 

 

Regarding growth the new UK forecasts are better than expected in March, especially for 2019:

  • 2019: 1.6%, up from 1.3% in the spring statement
  • 2020: 1.4%, up from 1.3% in the spring statement
  • 2021: 1.4%, matching 1.4% in the spring statement
  • 2022: 1.5%, matching 1.5% in the spring statement
  • 2023: 1.6% (new forecast)

But they are still quite weak in historical terms especially compared to other G20 countries. Catherine Colebrook, Chief economist at the Institute for Public Policy Research, says these figures are still "dismal."

There were reports earlier this month that Northern Ireland's DUP party could break their 'confidence and supply' deal with Theresa May and vote against the budget - which might bring down the government.

DUP spokesman Sammy Wilson has confirmed that there is no plan to do this (BBC). There are several reasons for this. One of which being Chancellor revealing several "treats" to Northern Ireland, such as £2m to help Belfast city centre, £350 million for a Belfast city deal, work on devolving Air Passenger Duty to Stormont, and £300m for community education.

So, if the DUP voted down the finance bill it could affect this investment. The DUP and others also do not know the details of Britain's withdrawal agreement with Europe, this was one of the reasons why the budget was bought forward.

But the threat is still hanging over the government. The DUP could oppose government in future if exit deal means Northern Ireland is "separated from the rest of the United Kingdom".

Bringing forward the changes to personal allowances to April 2019 is a popular one, effectively a tax code for many and will keep the Tory backbenchers happy.

There were a few pension and finance announcements in the hard copy of the budget. The widely reputed change of pension tax relief did not occur. Though many can breathe a sigh of relief, the likelihood of reform is not off the agenda as it is "eye wateringly expensive" to the treasury.

The Commons Treasury Select Committee have recommended restricting tax relief as it is "not an effective or well targeted way of incentivising saving into pensions." The £41bn cost (2016/17) is also obviously a key consideration.

In many ways the chancellor was lucky, the extra money from the OBR forecasts gave him a certain amount of wiggle room. If this money had not mysteriously materialised the tradition austerity budget would have occurred.

To use the chancellor's "toilet" humour, his gamble could go "down the pan" and either an increase in taxes or an increase in borrowing or a combination of the both is likely to occur if either the OBR forecasts are inaccurate, and a no deal Brexit occurs. There is also still the possibility of a Brexit no deal budget come March 2019.