UK chancellor George Osborne has cut taxes and presented a budget that "unashamedly backs business" as the country struggles to recover from the global economic crisis.
He also said he would stick to the government's aggressive austerity programme, aimed at cutting state spending and reducing its debt. While the budget may represent prudent economics, it is likely to be politically unsustainable — unless it provides a quick and significant boost to growth and job creation.
This is unlikely. The independent Office for Budget Responsibility expects growth to be a miserly 0.8 per cent this year. This is not a number that Osborne can use to justify a significant tax-cut to those with high incomes while continuing to squeeze social programmes, even if he has taken more low-earners out of the revenue pool by hiking the threshold at which they must start paying tax.
While putting some money back into people's pockets will stimulate the economy, the budget does not have an aggressive plan to encourage growth. Osborne seemingly has not thought beyond his ideological commitment to cutting spending, even though faster growth combined with responsible state spending can generate the revenue needed to service and reduce debt. This is not the bold budget statement the UK needed to get its economy back on track.
