James Forsyth

A well-crafted Budget but the spending review will hurt more

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George Osborne’s Budget today was the first dose of pain. The second will be the spending review in October, which I suspect will put far more of a strain on the Coalition than today did. Non-protected departmental Budgets, everything apart from health and DFID, are going to be cut by 25 percent on average. But Osborne told the House he would hope that the cuts to defence and education would be significantly less than that. The unspoken part of that is that the cuts to some other Budgets will have to be significantly bigger than that; I expect there are a few people at BIS and DCMS looking around rather nervously this evening. When the cuts are laid out that’s when the current feeling of unease among a chunk of the Lib Dem backbenches will crystallise.

The Budget itself was as well done as it could be in the circumstances. The VAT rise will incur the most displeasure. It certainly doesn’t look great to do it having spent the campaign saying that you had no plans to. But I expect the calculation was made that the crucial thing was not to have to come back with more pain after this and the spending review so VAT was best done now while the Coalition had some political capital in the bank and while Labour was leaderless.