Strong growth should finance Mr Osborne's gambles

It has become increasingly clear that the Chancellor’s Budget was not quite as fully-financed as it first appeared. Many of the permanent giveaways were paid for by takeaways which will provide only a temporary source of revenue. Meanwhile, the forecasts for tax receipts continue to be based on the optimistic view that the economic recovery will naturally become much more “tax-rich”.

Nonetheless, we think that there is still a strong element of caution built into the OBR’s economic forecasts which may mean that fiscal policy does not need to be tightened quite as sharply as the current plans imply in the next parliament.