News analysis: British budget aids home-buyers, forecasts further cut in size of gov't

The final budget of the current British parliament contained headline policy items that will benefit households, home-buyers, and businesses as well as policy directions that will see the size of the government cut back to almost its smallest since the 1930s.

Headline items in the final budget of Chancellor of the Exchequer George Osborne before the May general election included a freeze in fuel tax rises, a rise in the tax-free income threshold, new tax-free bank accounts to help home-buyers and a stimulus for the British North Sea oil industry which has struggled in recent months because of falling oil prices and increased investment costs.

Despite the fact that the budget comes just six weeks ahead of a general election, the outcome of the election will have little impact in the short-term on the decisions and policies outline in Osborne's budget.

Jack Meaning, associate fellow at the London-based think-tank the National Institute of Economic and Social Research (NIESR) told Xinhua: "All three major parties have more or less signed up to keep to the spending path at least in the relatively near term. So we are not expecting to see, whoever gets in to power, much change until we get into the 2017 type horizon. So over this year and the next the actual outcome of the election in terms of spending will not be that drastic."

Meaning said that it would be after 2016 that a new government's policies might differ from those in the budget. However the biggest influence on the fortunes of the UK economy after 2016 was likely to be outside of the control of British governments.

Meaning said: "It will be after the end of that 2016 period that we will start to see divergence but actually on current plans as they have been presented by all three major parties. The divergence between the political parties is much smaller in terms of its impact on the macro-economy than for instance international shocks coming from the eurozone are likely to be."

Osborne's budget continued his principal economic policy adopted in 2010 of reducing the amount of money the British government borrows to function, largely through a cut in how much the government spends rather than an increase in taxes to meet the shortfall.

This fiscal mandate aims to achieve a cyclically-adjusted current balance in government spending by the end of a rolling, five-year forecast period.

The amount borrowed by the government to function - its debt - fell to 90.2 billion pounds (135.25 billion US dollars) for 2014-15, about 5 percent of GDP.

This is down 41 percent in cash terms and 51 percent as a share of GDP relative to the post-war peak in spending during 2009-10, according to the Office for Budget Responsibility (OBR), the government-created independent fiscal audit authority.

Robert Chote, the OBR chairman, told a press conference on Wednesday that the budget predictions showed that government borrowing would fall each year until 2018-19 when it would be in surplus.

Chote said that the cut in public services spending for the coming year (2015/16) was slightly smaller than the average for the years 2010-2015.

He added: "The squeeze then becomes much more severe than anything we have seen to date in 2016/17 and 2017/18. This helps the government to achieve its desire to meet its fiscal mandate with room to spare. The squeeze then slackens in 2018/19 before going into reverse in 2019/20."

This would mean that there would be further cuts in government departments and welfare spending, which would match and in some cases exceed those of the budget-tightening that Osborne has carried out since 2010.

Meaning said that the cuts in spending outlined in the budget "would drastically reduce the size of government relative to the economy. Under these current plans we would not actually see levels fall to the lowest they have been since the 1930s as was previously put forward. (1 pound = 1.5 US dollars) Endit