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Sprinkling of Brown sugar

“It&#39s in the bag, Tony” proclaimed the Sun after the Budget. “Everyone&#39s a winner” screamed the Express. Anyone reading these papers would assume we had been on the receiving end of a remarkably beneficent Budget.

What we actually got was a handful of lacklustre pennies from the Chancellor&#39s groaning treasure chest.

Funny thing is, there was a strong and positive reaction to the Budget precisely because it was so dull. The media praised the few giveaways and applauded the Chancellor for avoiding trying to sweeten voters with short-term gimmicks and tax cuts.

The Mirror portrayed Gordon Brown as a gladiator although he looked more Russell Harty than Russell Crowe.

But was the substance good news for Worcester Woman and Pebbledash Man?

An ICM poll for BBC News Online suggests an overwhelming 63 per cent of people approved of Brown&#39s package even though the majority did not think they would be better off as a result. Only 23 per cent disapproved of it.

In fact, 47 per cent said they would like to see Brown move next door to number 10. What were they basing this view on?

Towry Law Financial Services&#39 Clive Scott-Hopkins declared it a non-Budget for investors and savers, citing:

No attempt made to simplify capital gains tax.

An increase in the inheritance tax nil-rate band less than house price inflation in the last year.

Annual inheritance tax exemption still stuck at 20-year-old level.

Abolition of minimum funding requirement will hit life offices and pension funds invested in gilts.

No mention of an extension to the compulsory annuity age.

Arthur Andersen tax partner Bill Dodwell points to the vote-winning family angle. He says: “This was a reasonable Budget for families. Everything involving a child has been uprated. In a year&#39s time, families will get £1,000 a year for a newborn child. That is serious money and everyone will notice that. The people who have lost are married couples with a mortgage paying the basic rate of tax.”

The Budget has been all but ignored by the City. Trading is often nervous or subdued before the Budget but, in practice, traders know there will be little in the Budget to move markets, not least because of the pre-announcements and leaks. This is in stark contrast to the US, where markets are moved on the strength of Federal Reserve chairman Alan Greenspan&#39s pallor.

At the market close on Budget day, the FTSE 100 index was fractionally lower, down by 10.2 points at 6,001.8.

Now that the Bank of England has independence, there is also no need to anticipate surprise Budget Day changes to interest rates.

The Budget failed to please the high-powered panel of economists giving evidence to the Treasury select committee.

“It is far from prudent, it is risky and expansionary,” says Geoffrey Dicks of the Royal Bank of Scotland.

Tim Congdon of Lombard Street Research says he is concerned that Brown&#39s fiscal loosening will stoke inflationary pressure in 2002/03 and risk a return to the familiar pattern of boom and bust.

National Institute of Economic and Social Research director Martin Weale says the Chancellor is trying to walk a tightrope between inflation and supporting growth. “My concern is that he has gone a bit too far towards inflation and therefore interest rates are likely to be a bit higher than may be desirable,” he says.

However, Confederation of British Industry chief economic adviser Kate Barker suggests the fiscal loosening was well timed to ward off the threat of slowing global growth. She says: “I think the Budget is still just the right side of prudent.”

All the panel agree that taxes will have to rise in the next Parliament if Brown wants to maintain the pace of growth in public spending envisaged over the next three years and keep the budget deficit stable.

We know the Chancellor is a safe pair of hands and I am sure he can prove this – and demonstrate his accountability – in other, far more substantial ways that could save us from a week&#39s worth of 40-page Budget Special pull-outs.

In the age of spin over substance, the question is, do we really need a Budget at all?

Interactive Investor users are divided. Forty-four per cent who responded to our poll said the Budget was a waste of time – all spin and no substance. But the majority believe the Budget should stay.

As The Guardian said: “This was not a Budget to win an election but a Budget for an election that is already won.”


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