UK Budget: analysts' reaction

UK Chancellor George Osborne on Wednesday unveiled his final annual budget as the final countdown started to what will be a tightly-fought general election in May.

Mr Osborne pledged to reduce the squeeze on public spending a year earlier than planned, new "help to buy" individual savings account to help first-time homebuyer save a deposit, a £3.1bn package to help the North Sea oil and gas industry, and a raising of bank levy rates. Economic forecasts were revised slightly higher while he predicted a budget surplus in fiscal 2018/19.

Below is some reaction from analysts and economists to the Chancellor's promises.

- John Hawksworth, chief economist at PwC said that the "biggest change" in the Budget was the decision to end austerity a year earlier than planned.

"Together with reduced welfare benefit spending due to lower projected inflation and unemployment, and reduced government debt interest payments, this should significantly reduce the scale of the squeeze on departmental spending over the course of the next Parliament," he said.

- Jon Fitzpatrick, head of oil & gas Emea at Macquarie Capital and president of the Scottish Oil Club, said that while the concessions were welcome, in reality they would "likely only benefit the handful of taxpaying North Sea producers and will not address the much larger, structural issues facing the North Sea oil and gas industry."

"There are a vast number of projects that are unfunded and unsustainable at current oil prices and many companies may not stay in the basin or business long enough to see the dawn of the oil price rising again."

- Dominic Bryant of BNP Paribas said that Mr Osborne took the gamble that "fiscal responsibility, rather than pre-election largesse, will be a vote-winner".

"Clearly raising the tax-free allowance and reducing taxation on savings will help at the margin, but there is little in the Budget to take the sting out of Labour's criticism on health service funding or public spending cuts generally.

"Time will tell if a remarkably restrained Budget will pay dividends at the ballot box."

- James Knightley of ING agreed that the chancellor had opted for "prudence over profligacy".

"Typically ahead of a UK election we see the government offering sweeteners to undecided voters. However, this time round Chancellor Osborne has been more careful, not wanting to undo his reputation as 'the man with a long-term economic plan'."

Mr Knightley pointed out that all of the chancellor's policy decisions will bring in a net £745m - resulting in a tightening rather than a loosening of fiscal policy over the next year.

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"There are some offsets which will be more obviously felt in coming years, such as increases in the tax free personal income tax allowance, lower taxes on savings through the introduction of a new tax allowance and changes to fuel and alcohol duty. Nonetheless, given the proximity to the election this is by historical standards pretty cautious stuff."

- Vicky Redwood, chief UK economist at Capital Economics, noted that the chancellor has modestly scaled back unpopular spending cuts, although she too, said that he largely resisted resorting to "blatant pre-election bribery".

"The chancellor has scaled back the spending cuts a bit, ending them a year early (spending in 2019/20 is now projected to rise in line with GDP, rather than falling further).

"So instead of a £23bn budget surplus in 2019/20, he will now run a smaller surplus of £7bn.

"But that still leaves four years of deep spending cuts to get through first. Indeed, the big picture is that the fiscal squeeze is still only halfway through, meaning that interest rates will need to remain very low throughout most of the next parliament."

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