Budget 2012: what the economists say

Philip Shaw, chief economist at Investec This means that the great consolidation continues, and we applaud the chancellor's determination not to be deflected onto any 'Plan B'. The major headlines will no doubt be reductions in taxation. This puts across a positive message that the UK is becoming a lower tax economy. As far as the public finances are concerned it remains a case of steady as she goes. Although the worst year of heavy lifting is probably behind us there remains much work to do and there is still a risk that another economic downturn blows the chancellor's fiscal strategy off course. Chris Crowe, UK economist at Barclays Capital: To the extent that the overarching aim of today's budget was to retain the confidence of gilt market investors, it can be declared a success. The government's deficit reduction plan has been tweaked but not fundamentally altered, and financial markets were unruffled. The Office for Budget Responsibility has again pronounced that the government is on track to meet its fiscal mandate, and although the UK's triple-A status remains precarious, a downgrade does not appear imminent. Geoffrey Dicks, chief economist, Novus Capital Markets In accordance with George Osborne's fiscal mantra (no unfunded giveaways), the budget was designed to be neutral over the next five years. A modest net fiscal giveaway in 2012-13 and 2013-14 is balanced by fiscal tightening from 2014-15 onwards. James Knightley, UK economist at ING The budget is fiscally neutral in that what it gives back in tax cuts and spending rises are equally offset by tax and spending changes elsewhere, and may placate the ratings agencies. However, we also have to consider tax and spending changes that have previously been announced, but will come into effect from this April. Consequently, there is still a significant tightening of fiscal policy to be felt this year, to the tune of £2.75bn.