22nd March 2012
The FT-SE 100 managed a half point gain on the day itself, followed by a fifty point reversal in the colder light of the morning after. Fund manager comment ranged from neutral to concerned with voices hailing the budget as having any degree of triumph conspicuous by their absence.
But sterling bond markets took the news more positively. There's nothing to scare the horses in the shape of the ratings agencies – if anything the UK's negative watch status might have risen a notch or so.
Simon Ward, the chief economist at Henderson Global Investors, reckoned the "UK Budget fell short of its tax-reforming boast".
He said: "The measures are disappointing relative to its billing as a tax-reforming Budget that will lift growth."
Ward is concerned that income tax changes mainly benefit some two million of the lowest paid and some 300,000 of the highest paid. That leaves around 28m people – and some of those will be drawn into the 40 per cent tax rate band.
The phased withdrawal of Child Benefit for households with the higher paid earning £50,000 – it disappears at £60,000 – and the removal of personal allowances for those topping £100,000 create "unwelcome humps in marginal rates" that "a tax-reforming Budget would also have tackled."
Corporation tax cut scepticism
Ward is sceptical that "the main growth-boosting measure of a faster cut in corporation tax to 22% by 2014-15" will be anything but marginal and "unlikely to have a major impact on business confidence and investment."
He adds: "Within the details, there is a large element of robbing Peter to pay Peter. The cost of the corporation tax cut, for example, is exceeded by increases in other business revenues, stemming from a higher bank levy, changes to North Sea taxation and controlled foreign company rules. The rise in the personal allowance, meanwhile, is partly paid for by freezing age-related allowances and extending VAT."
Others took a kinder view. One fund manager said he would view this as "a growth-supportive Budget, at least within the confines of a government in the midst of an austerity drive."
Juggling the coalition partners
Azad Zangana, the European Economist at Schroders was also more supportive, looking at the political juggling act of coalition government.
He said: "Facing pressure from both sides of the coalition, George Osborne delivered another neutral set of fiscal plans in his third budget as Chancellor. However, unlike his first two budgets, his strategy of shifting the tax burden on to the rich, and promoting pro-business and growth strategies seems to be more cohesive."
The economist believes that the "business-friendly" establishing of the National Loan Guarantee Scheme designed to give a 1% discount for credit to small and medium-sized companies is a "useful measure". But the £20bn involved is "in my view, too small to make a significant difference in the short term."