The overall tone of the 2010 budget:
âAs widely expected, the Chancellor delivered a completely neutral budget and it was the lame-duck we very much predicted. Whilst Darling did have a tough job in balancing the marketâs demands for caution with the voters thirst for political sweeteners, frustratingly he provided lots of broad headlines but a lack of nitty-gritty detail.
âHe skirted over topics that the markets desperately needed to explore, namely our burgeoning budget deficit, and concentrated on building his own legacy. Unfortunately, this was more of a lame-duck budget than a shining beacon of new Labour economic policy. This really will be the Lady Jane Grey of budgets, offering a short and disappointing legacy and will resonate little with the public.â
Reaction of sterling to the budget
âSterling dropped to a two week low against the dollar in reaction to the budget, but I donât expect to see much more movement, given that much will be priced into the markets already. For a strong and positive reaction from the pound, we needed to have seen Darling tackle the deficit in a really decisive and detailed way. Unfortunately, this didnât happen, and as a result, sterling movement will be minimal.â Sterling is currently at $1.4899 against the US dollar (1.4958 before the budget) and â¬1.115 against the euro (1.1194 before the budget)
Reality of Darlingâs growth forecasts
âDarling downgraded his forecast to sit in line with the Bank of England, which offers us no surprises. However, our slow and protracted recovery makes his growth expectations bullish and overly optimistic. His figures are based on the idea that consumers will regain a strong enthusiasm for spending this year â as weâve seen however, with poor retail figures and rising inflation, this is far from the case, and individuals continue to remain economically wary.
I think this was a political move to make sure that, if this is Labourâs last budget, it wonât be tarnished by the legacy of hugely downgraded growth forecasts.â
Deficit and fiscal tightening â higher taxes, spending cuts
âWhen talking about the prospect of fiscal tightening, Darling was cautiously frank â it was clear he wanted to avoid scaremongering. So whilst he acknowledged that economic growth was still weak, he confirmed that he wasnât prepared to jeopardise our recovery by introducing swingeing spending cuts. Rest assured, however, these cuts will come after the election â whether itâs a Labour or Conservative victory.â
Paddy Earnshaw, Customer Director at Travelex, comments on the budgets affect on SMEs:
âIf Labour does deliver on their promises, I think, on balance, this budget was excellent for SMEs, as the Chancellor encouraged the banks to extend credit to smaller businesses. It is pleasing to see that the belief we will export our way out of a recession is supported by the Chancellor.
âUnfortunately, a poll of our SME customers highlighted the lack of trust surrounding Labourâs assurances and directly contradicted Darlingâs statement that credit lending to businesses had improved. Our customers said, by and large, loans to business hadnât actually increased and any statement to the contrary was just pre-election positioning from the government.
âWith over 90% of our SME customers polled this morning believing this to be Darlingâs last budget, it remains to be seen whether the benefits will materialise - whether there is a Labour or Conservative victory.â