The chancellor may generate a few good headlines with his small giveaways, but this was more of the same
George Osborne intends to go down fighting. That was the over-riding impression from a budget that began with the chancellor dolefully explaining just how dreadful everything was and ended with him eulogising about how he was doing it for the "aspiration nation".
By the time he claimed he was delivering a package for a Britain that "wants to be prosperous, solvent and free", the chancellor appeared to have forgotten that the economy was still 3% smaller than when it went into recession five years ago and was now teetering on the brink of a triple-dip recession. It was as if Tigger had replaced Eeyore halfway through the speech.
The budget will no doubt grab some decent headlines but is likely to prove a five-minute wonder. Why? Because previously announced changes to benefits and tax credits dwarf the small giveaways. Because the gap between wage increases and price increases is large and widening, cutting into living standards. And because there is no reason to think the state of the economy will materially improve any time soon. Indeed, the renewed crisis in the eurozone following the botched bailout for Cyprus is an indication of just how vulnerable Britain is to adverse shocks.
That said, in three important respects, the budget could be counted a success. It was better than last year's omnishambles (not hard, admittedly); it went down moderately well in the financial markets even though there was more bad news on growth and borrowing; and it fleshed out a clear political strategy in which the government targeted voters in swing seats.
The penny off a pint of beer, the freezing of excise duty on petrol and the help on offer to homebuyers were all populist measures designed to show that the chancellor was on the side of "strivers", rather than welfare claimants, public sector workers and tax dodgers. Osborne also raised money, but in quite subtle ways – through technical changes to pensions and a fresh clampdown on tax avoidance and evasion. As a result, the budget had the feel of a giveaway package even though it wasn't.
But despite the presentational slickness, this was still more of the same, as the Labour leader, Ed Miliband, pointed out in a crisp and combative response. The economic backdrop remains dreadful and there is to be no fundamental change to government thinking on how to bring to an end the weakest recovery from recession in almost a century.
It is little more than three months since the independent Office for Budget Responsibility predicted that the UK would grow by 1.2% in 2013, but that forecast has now been halved to just 0.6%. If this proves to be accurate, it will be the third successive year of sub-1% growth, a marked contrast to the rapid and robust recoveries that followed the recessions of the 1980s and 1990s. Osborne's comment that "it's taking longer than anyone hoped" was a statement of the painfully obvious.
Predictably, weaker growth has left deficit reduction well off track. The chancellor boasted he had cut borrowing by a third since arriving at the Treasury but the deficit will be twice as big next year – £120bn as opposed to £60bn – as expected in 2010. By 2015-16, the government will have borrowed almost £250bn more than forecast in 2010, enough to finance the NHS for two years with money to spare.
Faced with this combination of weaker growth and extra borrowing, one of the three credit rating agencies, Moody's, didn't even wait for the budget before stripping Britain of its AAA status. Expect similar announcements from the other two, S&P and Fitch, following the latest dollop of gloom from the OBR. Osborne used to be obsessive about protecting the UK's credit rating; tellingly, there was not one mention of it in the budget speech.
Faced with this record of failure, the chancellor had a choice. Admit that he had got it wrong and change course. Or brazen it out. Osborne decided to brazen it out. It was not his fault that the economy had flatlined for the past two years; it was the fault of the last Labour government for leaving him such a rotten inheritance and the eurozone for failing to sort out its debt crisis.
So Osborne's fourth budget showed him still wedded to plan A. This has been slightly amended since 2010, abandoning the commitment to start reducing national debt as a share of GDP by the end of this parliament (now pushed back by a further year) and allowing the automatic fiscal stabilisers (borrowing more to compensate for growth shortfalls) to work.
There were a few fresh tweaks. The Treasury will put more money into the economy than it takes out in both 2014 and 2015, even assuming the chancellor raises as much from his anti-avoidance measures as he anticipates. Add in the cash provided for homebuyers and the boost will be worth just under £4.5bn in 2015.
That, though, will not make much of a difference to a £1.5tn-a-year economy, and it was clear that the Bank of England would continue to shoulder responsibility for getting the economy moving again. From the start, it has been Osborne's conviction that by aggressively tackling the budget deficit, he creates space for the Bank to boost growth through ultra-low interest rates, quantitative easing and a competitive level for the pound.
Osborne is expecting great things of Mark Carney, who takes over from Sir Mervyn King at Threadneedle Street on 1 July, and signalled changes to the way the Bank conducts monetary policy. These were a bit less radical than some of the advance billing suggested but will result in an even greater amount of stimulus being provided for a longer period of time. One of Carney's first acts as governor may be to provide guidance to the City that interest rates are not going up in the current parliament.
Yet as Trevor Greetham of Fidelity noted, one lesson from the past few years is that the mix of tight fiscal and loose monetary policy is unlikely to lead to a recovery when interest rates are close to zero and consumers want to pay down debt.
Osborne rejects this analysis. He thinks recovery is just around the corner. He is either extremely prescient or in total denial.