Osborne really couldn't be addressing the nation under worse auspices. Yesterday, the OECD released new data confirming that the UK is heading toward recession. The economy is set to shrink by 0.03% this quarter, it revealed. And there's no light at the end of the tunnel with a further 0.15% contraction forecast for the following three months.
Bank of England governor Sir Mervyn King, ever the bringer of ill tidings, also believes that growth will remain flat for the next six months - possibly beyond, if the eurozone crisis is not resolved (and let's face it, it probably won't be).
So, what can we expect from today's Budget? Well, in the last Budget back in March, the Office for Budget Responsibility (OBR) cut its growth forecast for 2011 to 1.7% and its 2012 forecast to 2.5%. It will no doubt shave a few more points off these estimates; growth is likely to wither down to just 1%.
After all his sound and fury on cutting the deficit, Osborne's likely to be red-faced on the borrowing front too. Debt was supposed to fall to £37bn by 2014-15, but with public spending actually rising to keep the UK economy moving, this figure will hit £81bn, more than double the forecast.
In an effort to drum up goodwill over the past week, the Chancellor has leaked a few of his more crowd-pleasing plans. He wants to make British pension funds invest in £30bn of planned infrastructure projects over ten years. He is also creating several worthy schemes: £1bn over three years to subsidise work placements for young people, £40bn to underwrite bank loans to small businesses and a mortgage indemnity scheme to boost the housing market. The number of free childcare places for deprived two-year-olds will double to 260,000 to help more mothers back to work.
On to the squeeze. How is old Osborne going to save up all this cash? Savings in the welfare budget are likely. Benefits will probably be frozen, rather than following inflation (5.2% as of September). Working tax credits could also see cuts. This doesn't begin to cover the scope of savings that Osborne needs to make to deliver his 'age of austerity'.
But British businesses are desperately hoping the Chancellor's financial prudence won't knobble them, the agents of growth. Fighting the corner of enterprise, the FSB has called on government to implement bold measures to help small firms to grow and address long-standing barriers to enterprise.
Here's a round-up of the FSB's proposals:
- Introduce a true fuel duty stabiliser which will trigger an actual reduction in the pump price, as the FSB believes that the fair fuel stabiliser announced at Budget 11 does not go far enough, and the sheer volatility in price of fuel at the pumps means that businesses cannot plan overheads properly
- Continue on its better regulation agenda to create a regulatory culture which supports business and growth, especially looking at regulation which comes from Europe which will further discourage firms from taking on staff and look to remove some burdensome employment regulations
- Look closely at the proposals from the Office of Tax Simplification to simplify the tax regime for the smallest of businesses, as complying with the tax system is one of the biggest burdens for this sector
- Reform the Government’s approach to procurement to give small firms better access to the £240 billion pot spent by the public sector – currently only 6.5 per cent of central Government spend goes to small and medium-sized businesses, far from its 25 per cent aspiration. Even increasing public sector spend with small businesses by just one per cent would target an additional £2.4 billion towards those firms.
Will this wishlist come good? Tune in at 12:30 and find out.