Budget 2013: A spoon full of sugar but the medicine unchanged

As well as being Budget day, March 20 is the first day of spring – but Britain is still shivering as winter drags on longer than anyone thought it could and Austerity seems as intractable as the temperature.

“It’s taken longer than anyone hoped,” George Osborne admitted to Parliament as he delivered his Budget speech.

The squeeze on spending will, if anything, get worse next year. Already public sector employment has fallen for 13 quarters in a row and when departments meet to set their budgets next year they’ll have to find an extra £1.5 billion of spending cuts to go with the £10 billion they were already told to look for.

But the chancellor is not for turning, he’s convinced that reducing the deficit and spending is vital medicine for the UK economy.

“We’ve got a plan to cut our structural deficit,” Osborne told the House of Commons. “And our country’s credibility comes from delivering that plan.”

“[Increasing spending to borrow more] would pose a huge risk to the stability of the British economy, threaten a sharp rise in interest rates and leave the burden of debts to our children and grandchildren.

“I will not take that gamble with the future of this country.”

So how do you get the public to take an unpleasant medicine? Try adding a spoon full of sugar.

Full coverage of chancellor George Osborne's 21013 Budget speech

George’s sweetner

There was plenty to cheer in the Budget this year. A penny off a pint of beer, a new scheme to help people buy houses, a £108 tax cut for basic rate payers, an extra 1% off corporation tax and £3 billion more a year on capital spending – money going on roads, rail, broadband and the like.

But none of this will raise more than a small cheer. When we’re already borrowing £108 billion a year more than we’re getting in tax and the national debt stands at an eye-watering £1.1 trillion it’s all little more than a drop in the ocean.

Any more sweeteners George?

How about public sector wages being capped at 1% until 2015? That will leave a sour taste in the mouth for many: that’s six long years of below-inflation pay rises for people in the state’s employ. Whitehall will have to find another 1% to trim from their budgets too.

And even that isn’t enough – on current plans the Government will still be spending more than it’s earning in 2017-18, when it initially promised to clear the deficit by 2015.

Green shoots

But despite the arctic winds, there are green shoots.

Unemployment is 136,000 lower than it was a year ago. In the three months to November the number of civil servants dropped 20,000 while private sector employment grew 150,000. That’s less unemployment benefit being paid and less going on the salaries of public sector workers at the same time.

The FTSE is soaring too - hitting 5-year highs - house prices and mortgage lending are on the up, even first-time buyers are returning to the market.

George did his best to encourage these green shoots. An exemption on employer’s National Insurance helping businesses hire people. A couple of new initiatives to help the housing market. The scrapping of stamp duty on share purchases for smaller companies making it easier to invest in them.

These measures were praised, but you couldn’t help feeling he was doing little more than rearranging the straws on an over-burdened camel’s back.

The Budget was described as “fiscally neutral” by Osborne, growth forecasts were halved for this year - to just 0.6% - and revised down for the years to come too. Borrowing forecasts remained high, with debt to hit 85% of GDP and not start falling until 2017-18.

"After all the misery, all the harsh medicine, three years, no progress, deal broken. Same old Tories and all he offers is more of the same,” Labour leader Ed Miliband said in response to the Budget statement.

Because, while everyone likes a little sugar, if the patient isn’t responding to treatment after five years it might be time to change the medicine.