Budget: Video reaction from Ernst & Young

STEPHEN SANDYS, director of Ernst & Young in Birmingham, said: “In terms of overall cuts, I was pleased to see that he confirmed he was adhering to this 80/20 rule primarily by focussing on cutting spending rather than by increasing taxes.

“My personal view is that this is the right approach and that’s supported by the Ernst & Young ITEM Club of economic commentators. It’s a widely-held view that this has been successful in the reducing deficits.

“CGT rate has not been raised as high as one might have feared or expected.

“The reason for that not coming to pass is that he seems to have listened to the view that if you rise it too high people don’t sell their assets and the amount of tax you get starts to fall.”Hetal Mehta, senior economic advisor to the Ernst & Young ITEM Club, said: “This package is much tighter than most had envisaged, with an extra tightening worth £40bn a year by the end of the Parliament on top of the £44bn built into the previous government’s fiscal plan. We feel that the objective to eliminate the cyclically-adjusted current deficit by 2014-15 is quite ambitious, but commendable.

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“With fiscal policy much tighter, one would expect a slower economic expansion, which is what the revised OBR projections show. This consistency is heartening and safeguards the credibility of the new framework. The pace of tightening announced should placate the markets.
 
“However, while the overall borrowing projections give us an idea of how fast the government intends to tighten policy in the coming years, without the publication of the Departmental Expenditure Limits, it is difficult to assess the credibility of that intention. Most departments will face a 25% cut, while others, notably health and education are likely to fare better, but we cannot say for sure at this stage.
 
“Overall, it was a well crafted and balanced Budget.”

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