Since the introduction of the Pre-Budget Report (PBR) in November 1997, the spring Budget has lost some of its aura. This one was more political theatre than economic statement. Macro-policy gave way to micro-tinkering.

Gordon Brown began his 10th Budget as chancellor by singing his own praises. He boasted that growth had been uninterrupted for more than 10 years and that inflation and interest rates were low and stable. He added that under his tenure, the UK economy has grown faster than the EU's and Japan's, and at a rate comparable with those in the United States and Canada.

Stability, he maintained, would continue. Brown forecast inflation on target at 2% in 2006 and beyond, with inflation expectations having halved since 1997. He forecast that the growth in GDP of 2-2.5% would rise to 2.75-3.25% in 2007 and 2008, although the consensus among commentators is that it will grow 2.2% this year and 2.5% in 2007.

The chancellor glossed over some of his public finance forecasts, saying that he was "borrowing to invest". He maintained that he would adhere to two basic fiscal rules: the Golden Rule, to balance the public finances over the economic cycle, and the Sustainable Investment Rule, that public sector net debt should not rise to more than 40% of national income.

On the Golden Rule, Brown said there would be a current surplus of 16bn over the cycle, and that net debt would rise from 36% of GDP to 38%. Public sector net borrowing is higher than forecast, at 37bn in 2005/06 and 36bn in 2006/07. The "black hole" in the public finances is less visible than previously, as the chancellor anticipates 30bn of asset sales by 2010 and a slower growth in spending.

Focus on education
The most eye-catching of the chancellor's measures was his emphasis on education. He said Britain would need more highly skilled workers and fewer unskilled ones in the future to compete with China and India. To this end, he announced a 34bn investment in schools over the next five years, with more money going direct to head teachers. Some 3,000 science posts will be created, free college education available for under-25s and training for low-skilled women doubled.

On the environment, Brown showed mixed green credentials. Having been frozen for several years, from 2007 the Climate Change Levy is to be indexed to inflation. A higher Vehicle Excise Duty band has been introduced for "gas guzzling" vehicles (210 for petrol and 215 for diesel) and a zero rate for those which create the least pollution. The volatility of oil prices encouraged Brown to defer the increase in fuel duty until September.

Home comforts
Property buyers will benefit from a 5,000 increase in the Stamp Duty threshold to 125,000. Would-be homeowners will benefit from the shared-equity initiative, which involves the government and/or a commercial lender retaining a stake in a property to make it more affordable. The threshold for Inheritance Tax is to be raised from 275,000 to 325,000 over the next four years.

Personal tax allowances are to rise in line with inflation, but the child element of the child tax credit is to be raised by 14% over the next four years. Smokers will pay more, as will wine and beer drinkers. The duty on spirits has been frozen.

The Budget contained nothing to address the black hole in pensions and little on business regulation or measures to boost sluggish investment. The one-hour speech may have been good political theatre, but on a practical level, it might have missed some good opportunities.

30-secong briefing on... The Budget
- Gordon Brown's 10th Budget was basically neutral, with the positives balancing the negatives

- Macroeconomic stability over the past decade has delivered steady growth and low inflation and interest rates. The chancellor forecast that inflation will remain on target and that growth would pick up from 2-2.5% this year to 2.75-3.25% in 2007 and 2008

- The two fiscal rules the Golden Rule and the Sustainable Investment Rule will continue to be met. The "black hole" in the public finances is being filled with higher borrowing ("borrowing to invest"), 30bn of asset sales, savings from efficiency gains and slower growth in spending. Some departments face spending cuts

- Education and skills were the big winners. Capital spending on schools is to be increased and head teachers are to receive big rises in the annual grants paid direct to schools. Young adults seeking to improve their education will be able to return to college free of charge. More money is to be made available for the training of women with low skills

- The Climate Change Levy is to be indexed to inflation, and a new Vehicle Excise Duty band is to be introduced for "gas guzzling" vehicles. But fuel duty is being frozen. Most excise duties are to rise in line with inflation

- The Budget said nothing about the pensions black hole and little about the burden of business regulation. It offered little to boost sluggish business investment

David Ross is an independent economics consultant running
his own business, Ross Economics & Editorial Services. He
can be contacted at: dhross@blueyonder.co.uk