The British budget tries to overcome the damage to the economy caused by Covid-19 – and to a lesser extent by Brexit.
Like all budgets, its a balancing act between giving and taking.
But this one is unusually dependent on timing and sequencing.
There are three big things in this budget:
1- Extra spending on supporting the economy through the Covid crisis for the next few months – entirely expected
2 - A boost to economic recovery in the form of a temporary tax break to get businesses to spend money this year and next – the eye-catching big new idea in this budget
3 - Tax rises to fill in the holes in the government finances punched by the pandemic – well flagged in advance to take the sting out of it.
Lets start with the good news for UK taxpayers – no tax hikes just yet.
Rishi Sunak, the UK Chancellor of the Exchequer (Minister for Finance) says the economy is too weak right now, and needs to recover.
So, the tax rises he announced don't take effect for a couple of years.
But taxes are going to rise, make no mistake.
In its analysis of the budget, the Office for Budget Responsibility (OBR), the UK equivalent of the Fiscal Council, says this budget plan will increase the tax burden from 34% of GDP to 35% of GDP over the next five years.
And at that level it will be at its highest since the late 1960s, when Labour's Roy Jenkins was Chancellor.
The big headline rise is in Corporation Tax – and this is significant from an Irish point of view. Its going up, from 19% now to 25% in two years time. That will be exactly double the headline rate of Ireland's corporation tax, which is part of a series of policy measures in Ireland to encourage inward Foreign Direct Investment.
For the past decade it has been British government policy to cut the corporate tax rate, a policy started by David Cameron's Chancellor of the Exchequer George Osborne – who professed an admiration of the Irish business tax rate (as did, arch Brexiter John Redwood in a newspaper article at the weekend arguing against any tax rise).
Now, that policy has gone into reverse.
Indeed the OBR says the six point hike in corporation tax will account for half of the extra tax burden.
It will move the UK back into the mainstream of advanced economy corporate tax rates. #
Critics (including former Brexit minister David Davies) say it will make the UK less attractive to inward investment.
It has also unsettled some in Northern Ireland, including the DUPs Sammy Wilson MP who said in the Budget debate the Republic of Ireland will be even more competitive against Northern Ireland when it comes to FDI.
The OBR says the corporate tax hike will pull in an extra £17bn a year by 2025, and take tCT receipts as a share of GDP back to the historically high level of the Lawson boom of 1989/90.
They note that getting a historically high share with a rate that is still historically low reflects the base broadening of the past decade, in which a lot of tax deductions were scrapped.
Then there is Stealth Tax, a tactic well used by the Irish Finance ministry to bring in extra revenue by not indexing tax bands and allowances.
Mr Sunak has announced a four year freeze to the income tax personal allowance and higher rate threshold.
This means that politicians can honestly say we didn't put the tax rates up – but they will still get more money into the state coffers each year, as expected inflation will increase wage levels over time.
The OBR says the move will bring an extra 1.3 million people into the tax net, and create a million new top rate taxpayers by 2025. It should raise an extra £1.6bn in the first year to more than £8bn in 2025/26.
That is almost £20 billion in extra income tax and insurance from the inflation effect.
As for the pandemic, the Government has been forced into the highest level of peacetime borrowing on record, so it can spend money to keep the economy ticking over in the hope that much of it will still be in place to re open over the summer.
The big numbers look scary - £355 billion over the past year – almost 17% of GDP (Ireland's bank bailout costs in 2010 were 20% of GDP).
That should fall to £234bn this year – still 10.3% of GDP, a figure higher than the 2009/10 peak for British borrowing at the height of the financial crisis.
But unlike many finance minsters, this one has not cut capital spending to help balance the books.
In fact Mr Sunak announced a big capital spending boost in his budget this time a year ago, form 1.9% of GDP last year to 2.7% in 2025.
That is good – economies need consistent capital spending by governments to ensure public infrastructure bottlenecks don't hold back growth.
But there will be cuts in current spending – and that may hurt.
The estimate is for a cash cut of £3bn a year in departmental spending.
Indeed the opposition Labour party has gone on the attack, noting there is no increase in the health budget, depsite all the fine words lavished on the NHS during the pandemic.
The OBR thinks the persistent health costs of the Coronavirus could be higher than the government expects, which could mean cutting spending elsewhere or raising yet more taxes to pay for it.
But the OBR is expecting the economy to rebound at a rapid pace – starting of course from a much lower base than usual, but still the combined effects of unlocking, fueled by the UKs rapid vaccination programme, and the unwinding of high household savings, should see the economy grow by 4% this year.
Last year it fell by 9.9% - the biggest fall in 300 years.
In 2022 it is forecast to do even better – 7% growth.
But this Chinese (or Irish) growth level is short lived, dropping back to a more normal 1.7% in the remain three years of the forecast.
One of the things that Mr Sunak hopes will contribute to the big bounce this year and next is a budget measure to boost investment by companies.
Its a "super deduction", allowing companies to offset capital spending against their tax bill – at the super generous rate of 130%
Mr Sunak gave an example of how it works in his budget speech.
A company spends £10 million on a new piece of equipment.
Under existing tax law it can deduct £2.6 million of that against tax. But under todays budget measure it can deduct £13 million.
The catch? The tax break only lasts for this next two years.
This is a huge incentive to companies to bring forward investment spending into the next two years.
Britain has suffered from a very serious under-investment for the past five years due to Brexit, as companies have waited to see how the UKs departure from the EU would play out.
Now they know – and as of today they have a huge fiscal carrot dangling in front of their faces, urging them to spend, spend spend.
Mr Sunak says its the biggest tax cut for business the UK has ever seen.
The OBR says the cut is worth £12 billion a year – ten times more generous than the equivalent temporary capital allowance measure in the 2009 budget, that was designed to boost investment in the wake of the financial crisis.
So the Chancellor will give to business over the next two years, with this big tax break, then take back from business from 2023 onwards with the corporation tax hike.
Again, the incentive is to invest in the immediate term in order to make higher profits in the medium term (needed to keep dividends stable if the government is taking more).
Overall – in an analysis that to this reader recalls the kind of fiscal programmes associated with Michael Noonan or the late Brian Lenihan - the OBR thinks the tax rises and spending cuts announced in the budget should see the deficit all but eliminated by 2025, while the national debt should stabilise and begin to fall by then as well.
But it warns that even a small increase (30 basis points) in interest rates on government debt would set the debt back on a rising path again.
So the margins are fine (there has already been a 30 point rise in interest rates since the OBR closed off its forecast on 5 February and today), and the timing is subject to all the usual economic and political risks – and the Covid 19 risk.