The view from the Institute for Fiscal Studies

It's the halftime coffee break here at the launch of the Institute for Fiscal Studies' Green Budget, so I thought I'd send CoffeeHousers a quick update. But first, just to be clear, that's green meaning green, not green meaning environmental. This is the IFS's annual, different-hued version of the Treasury's Red Book. It's their overall take on the economy and public finances.

So far, there has been little that will surprise or disconcert George Osborne as he prepares his own Budget: the picture is expectedly grim. As John Walker, chairman of Oxford Economics, put it in his warm-up routine on the general economy, 2011 was ‘disappointing’ and 2012 will be ‘another difficult year’. Lending is weak; business confidence is fragile; unemployment is set to rise; and, by Oxford Economics' forecasts, the economy will grow by only 0.3 per cent this year, as opposed to the official figure of 0.7 per cent. And that's even assuming that the eurozone manages to discover a cure for its current malaise, rather than just breaking up. ‘There are significant downside risks to our forecasts,’ admitted Mr Walker. And if the eurozone does experience a middling sort of collapse, then he thinks that our own economy could shrink by up to 3 per cent around 2013.

But it's not all doom and dreariness. For instance, Mr Walker said that our corporate sector is in a ‘very healthy financial position’, albeit because those companies are sitting on their cash rather than splashing it around in the wider economy. And he pointed towards strengths in the US and in emerging economies.

The public finances produced a similar picture: prevailing grimness with a few fleeting bright spots. Of course, we already know about most of the bad stuff. That's our pile of debt, and the deficits that are contributing to it. While the good stuff appeared in some of the IFS's forecasts. Thanks mainly to underspending departments, they reckon, the government could borrow £2.9 billion less than expected this year. Tax receipts might also be higher in the medium term.

Even so, the IFS stressed that George Osborne doesn't have much room for manoeuvre. Even if economic growth wavers just a little bit, then the Chancellor could break both of his fiscal rules. If the eurozone cracks, then, well, I'll blog that blow-up later.

A chart that particularly caught my eye was one setting out how much fiscal consolidation there is ahead, and where it will fall. We've got just 27 per cent of the tax hikes to come, but 88 per cent of the total spending cuts – including 88 per cent of the remaining cuts to benefits. The politics of that will be something to see.

Anyway, I shall return to my cup of joe, and then to the second-half of this show. Expect more detail, and a few scary charts, later.

UPDATE: My more detailed thoughts here.