In at least two respects – one expected, the other not – this was a historic budget.
The bit no one expected came just before midday. Normally on budget day, the documents containing all the measures and the official forecasts from the Office for Budget Responsibility (OBR) are published online when the chancellor has finished her speech.
The minute she sits down in the House of Commons, traders, journalists and economists around the country start frantically refreshing their browsers, hoping for first sight of this critical document.
It’s critical because often there is a striking gap between what the chancellor says in her speech and the details inside the document.
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Take, for instance, one of the chief money-raising measures in this year’s budget: the decision to limit the amount of money people can put into salary sacrifice schemes – something that affects most private sector pensions.
To judge from the chancellor’s speech alone, you might have thought this was a somewhat minor move designed to close a loophole used mostly by wealthy people. But the document shows that, on the contrary, this is a massive tax-raising measure that will bring in a whopping £4.7bn the first year it’s properly instituted.
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That is a lot of money – a lot. And whenever the government raises those kinds of sums it invariably means a lot of people will end up paying quite a bit more money in tax. So you see the point: it’s only when you get the final document that you can see the grisly details in black and white.
And those details are more than academic. The contours of the numbers contained in the OBR’s Economic and Fiscal Outlook (EFO) – to give it its proper name – are enormously market-sensitive. They are sometimes the evidence base upon which gilt traders decide whether or not to invest in UK securities.
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All of which helps explain why, when the OBR accidentally published its EFO online, nearly an hour before the chancellor stood up to deliver her speech, it caused an extraordinary flurry in markets.
The cost of government debt yo-yoed dramatically as investors hurriedly downloaded the documents and tried to work out what this budget meant for the UK economy.
This was the biggest budget leak in history and doubtless we will hear more in the coming weeks about how it happened and about the consequences. But, as I said at the start, it was not the only historic thing about this budget.
Because it also commits the government to a set of economic policies that take Britain into uncharted territory. The total level of taxation in the UK was already high before this budget – indeed, it was already heading up to the highest level in at least 70 years (actually it’s really the highest level ever – it’s just that the numbers only go back to the 1940s). But this budget supercharges the rise.
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As a result of the policies contained in it, as well as the ones in last year’s budget, this parliament is, according to the Institute for Fiscal Studies, heading towards being the biggest tax-raising Parliament in modern history (the numbers in this case only go back to 1970).
Those higher taxes were, the chancellor judged, necessary for two reasons. First, they help her meet her fiscal rules, which in turn means investors begin to charge Britain less to borrow. And the early signs on this were promising: the yield on UK government debt dropped in the hours after that initial OBR-fuelled roller-coaster.
Second, they give her enough money to finance extra spending, much of which is going into extra welfare, in part to fund the abolition of the two child benefit cap. In short, this government is taxing more to spend more.
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That raises at least two questions. First, how successful will it actually be in raising those taxes? After all, Britain has never been as highly taxed as it will be at the end of this decade. Will Britons be content to become a high tax economy – like many of our European neighbours – or is the government being too sanguine about what this will mean for growth and, more to the point, its coffers.
Second, having spent much of its first 18 months trying and failing to control welfare spending – forced along the way into U-turns over its plans – can it really be depended on to keep to its expenditure plans off into the future?
The short answer is: no-one really knows. But now that the flurry of excitement over that historic leak is over, this big budget will be thoroughly scrutinised and thoroughly tested in the coming weeks and months.
