It's an old caution: don't judge a Budget for least 24 hours. And we could add to that, don't judge the economic impact of a Budget for at least a year. It seems the Tories have ducked the major political elephant trap by stating that reversing the 50% tax rate 'cannot be our priority.' That makes it a base-pleasing measure rather than a booby trap. Fine. Combined with efforts to clamp down on tax havens it may or may not be a good way to raise revenue. Let's see but if direct taxes have to be raised, this is the fair way to do it.
The Tories and the right-leaning press keep banging on about debt. This comment in the Spectator is typical which describes debt levels as a catastrophe. Don't get me wrong, debt levels are worryingly high but, really, what exactly is the alternative? Samuel Brittan in the FT certainly doesn't see that there's an alternative. He advocates very clearly a belt and braces job- fiscal and monetary stimulus. Is there any more respected economic commentator than Brittan?
And is this a uniquely British conundrum? Absolutely not. Funnily enough, Iain Dale in a post entitled, 'It's public borrowing, stupid', attaches a table of the debt of leading economies. It shows that the UK starts off from a relative low national debt level (excluding financial bail out provision) and ends 2010 less than Germany, France, the US, Japan, Italy, Ireland and others. Those figures may shift to a degree after today's announcement but the point remains. Robert Peston points out the unexpectedly high level of prospective gilt sales and the gilt markets have fallen today. But again, only time will tell whether that level of borrowing is sustainable beyond this initial shock. The UK economy is not a basket case- far from it- so it would be surprising if it were not.
So the overall message is yes, this is scary but we need to keep our heads, do the right thing, return the economy to growth without allowing too much output to be eliminated for good, then retrench expenditure, raise taxes, and allow growth to eat away the deficit. None of it sounds good but the Government is doing the right things in response to the most trying economic times we've seen, certainly since the early 1980s.