Comment: What a difference a year makes
IF Chancellor George Osborne was wondering if his honeymoon period in office was over, the reaction of business to his latest Budget will have left him in no doubt.
“Lukewarm” is perhaps the most charitable way to describe the response of the major business organisations, which welcomed measures such as the cut in corporation tax but seemed just as concerned about actions the Chancellor failed to take.
The CBI wanted more deregulation, the Chancellor did not go “far enough or fast enough” for the IoD while the British Chambers of Commerce said “actions will speak louder than words”.
If a week is a long time in politics, then a year is a very long time in business.
A year ago, George Osborne delivered a Budget very similar in character – maintaining the Government’s commitment to deficit reduction while using what wriggle room was available to offer concrete, if relatively modest, benefits to business.
The CBI described that Budget as one that “will help businesses grow and create jobs”, the IoD said he had “played his hand well” while the British Chambers of Commerce praised the Chancellor for prioritising business growth alongside deficit reduction. Indeed, Mr Osborne gained more credit for starting to cut corporation tax last year than he has for accelerating that process yesterday.
The explanation may lie in the latest figures from the Office of Budget Responsibility presented by George Osborne yesterday. The OBR revised its forecast for GDP growth in 2012 upward, but only from 0.7% to 0.8%, while its prediction for 2012 was downgraded from 2.1% to 2%. And this on the back of a year of anaemic growth in 2011.
After a difficult year, and facing a less than rosy macroeconomic picture for the forseeable future, business needed a bigger psychological boost from this year’s Budget.
And while fundamentally the Chancellor is still playing the hand he was dealt by his Labour predecessor on coming into office, Mr Osborne is quickly discovering that memories are short.
In 12 months time, the Chancellor will present his fourth Budget which will continue to be dictated by the fundamental need to cut the deficit. He should not expect the response to be any more enthusiastic.
