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from MacroScope:

Reasons to do nothing

It’s ECB day and the general belief is that it won’t do anything despite inflation dropping to 0.5 percent in March, chalking up its sixth successive month in the European Central Bank’s “danger zone” below 1 percent.

The reasons? Policymakers expect inflation to rise in April for a variety of reasons, one being that this year's late Easter has delayed the impact of rising travel and hotel prices at a time when many Europeans take a holiday. Depressed food prices might also start to rise before long.

More fundamentally, they do not see any signs of deflation psychology taking hold, whereby businesses and consumers defer spending plans in the expectation that prices will cheapen.

Expect ECB President Mario Draghi to state a number of times today that inflation expectations are anchored, although quite how one proves that is an open question.

from Anatole Kaletsky:

Osborne: Stealth convert to ‘Keynesian Thatcherism’

Britain’s government budget released this week is not a statement of economic policy. It is a program for winning next year’s general election.

In this sense, Chancellor of the Exchequer George Osborne’s speech was a natural development from the 2013 Budget, which launched Britain’s current economic recovery. I was one of the few analysts to perceive the remarkable transformation of the British economy that immediately resulted from last year’s budget because what Osborne did was deliberately obscured by what he said.

from The Great Debate UK:

Is controlling your own pension really a good thing?

A central pillar of George Osborne’s 2014 budget was the announcement that pensioners will no longer have to buy an annuity upon retirement and that they would have more control of their pensions pots, including the freedom to withdraw cash without incurring penalty tax changes.

This is a true blue move that has Conservative values right at its heart – giving retirees the right to do what they want with their money. While in most instances being freed from the shackles of government is something to be celebrated, in this instance a little government paternalism can be a good thing.

from The Great Debate UK:

Backing up the rhetoric

John Angood–John Angood is Tax Senior Manager at BDO LLP. The opinions expressed are his own.--

Confidence up. Inflation down. Exports up. Unemployment down. Growth forecasts up.  With this backdrop it must have been difficult for George Osborne to draw up his fifth Budget. But what we have ended up with is a Budget for blue rinsers rather than businesses. He obviously thinks that everything is heading in the right direction with the economy and exports so there is no need to do much, despite all the supportive rhetoric around helping businesses.

from The Great Debate UK:

Osborne’s pre-election gimmicks do little to address Britain’s long-term economic problems

Richard Wellings

--Dr Richard Wellings is Deputy Editorial Director at the Institute of Economic Affairs. The opinions expressed are his own.--

History is unlikely to be kind to George Osborne. Four years after he became chancellor, the national debt has exploded, the budget deficit remains at dangerously high levels, and an increasing share of tax revenues must be devoted to repaying creditors.

from MacroScope:

Osborne stakes out election ground with little fiscal leeway

The annual UK budget is always a big set piece but it’s hard to remember one where there have been fewer advance leaks – indicative of a steady-as-she-goes approach by George Osborne.
Having put so much political capital into reducing the deficit, to switch now at a time when the economy is recovering strongly would be politically risky. And with debt falling only slowly there is little fiscal leeway.

That’s not to say this isn’t a big political moment. Yes there is the finance minister’s autumn statement and another budget before May 2015 elections but this is the moment when the narrative for the economy and Britons’ wellbeing is staked out.

from The Great Debate UK:

Predictions and wish list for the Chancellor’s 2014 Budget

--John Angood is Tax Senior Manager at BDO LLP. The opinions expressed are his own.-

With the next general election just over a year away, it is likely Chancellor George Osborne will want to keep his powder dry and hold back any vote winning announcements for the Conservative Party manifesto or for the election campaign itself. That said, there are pressures from both the UK public (especially those experiencing the continued squeeze on household incomes) and businesses that are continuing to experience the effects of the recession. With this in mind, I have set out below what I think could happen on Wednesday, and some of the measures I’d like to see introduced.

from The Great Debate UK:

Budget day: Politics not economics

--Sam Hill is Senior UK economist at RBC. The opinions expressed are his own.--

The headlines generated by the forthcoming UK budget are likely to be political rather than economic; the general election is next year. Despite a faster than expected fall in unemployment and inflation, macroeconomic developments since the December autumn statement present limited scope for forecast revisions to government borrowing. But come the post-budget analysis, some of the seemingly esoteric revised economic assumptions may have important consequences for how the budget is perceived politically.

The modest changes we do expect to the economic forecasts would be seen as positive in essence. Small upgrades to the growth outlook should translate into borrowing reductions of  between £3 billion and £6 billion per year throughout the five-year horizon. That would leave the underlying measure of borrowing at £332 billion for the six years to 2018-19, down from £358 billion in the existing forecast from December, which itself represented a significant improvement on last year’s budget.

from The Great Debate UK:

Budget preview: Don’t expect pyrotechnics

--Nick Beecroft is Chairman, Saxo Capital Markets, Saxo Bank. The opinions expressed are his own.--

Those expecting a rivetingly exciting spectacle when the chancellor announces his budget next Wednesday will be in for disappointment, but that doesn’t mean that this won’t be an intensely political budget, given this really represents his last chance to make changes which will be fully appreciated by the electorate by the next general election. Having said this, his room for manoeuvre is limited, and the effect on the overall fiscal balance will be minimal.

from The Great Debate UK:

Budget background: Dark with light patches

--Laurence Copeland is a professor of finance at Cardiff University Business School. The opinions expressed are his own.--

Spring has sprung.

The grass has riz.

I wonder when the Budget is….

On 19th March actually or, more importantly in this age of nonstop campaigning, six weeks before the European elections and barely a year away from the general election. Since the 2015 Budget will be too late to affect our wallets before we go to the polls, this is George Osborne’s last chance to reassure us that the economic situation is under control. Will he be able to resist the temptation to give us a reward for our patience through four years of austerity and to reassure us that the misery is nearly over?

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