Robbing selective Peter to pay for collective Paul There can be few more bizarre events than the British Budget day. The chancellor has to cram into one hour-long speech, surrounded by much razzmatazz, a vast series of announcements on tax rates, the tax structure and anti-avoidance, some expenditure and financial measures, an economic lecture and a vast number of other proposals, some of which have nothing to do with the Budget but are there to beef up the statement. It is taken for granted that all these proposals, however ill-digested, will automatically become law, even when there is a coalition government. On the day itself, armies of experts assemble to make sense of the more cryptic sentences in the speech; and finally someone like the chancellor congratulates everyone on a magnificent job of interpretation. Anyone who remarks that the job is unnecessary and unknown in other lands is treated as a spoilsport, like someone who wants to call off Derby day. Apart from his central economic judgment, the chancellor feels obliged to make many mutually offsetting tax adjustments, as Rudyard Kipling once put it, "robbing selective Peter to pay for collective Paul." And then we have the line-up of so-called ordinary members of the public, complaining, "there's nothing in it for me," as if they should expect a bonus from a statement of government bookkeeping. One day a really radical chancellor will stand up to seek a renewal of the power to levy income tax (all he is legally obliged to do), direct Members" attention to a statement of government finances in the library and then sit down. I do not expect to see it in my lifetime. At one time, the central economic assessment would be based on how much the chancellor had "taken out of" or "put into" the economy. The best measure in these terms is probably the current budget deficit, which is expected to fall from 6.5 per cent of gross domestic product in the fiscal year now ending to 6 per cent in 2012-13. It would take more than the space of this article to explain why the "cyclically adjusted" version of this is not worth the paper it is written on, but fortunately the change in this is very similar to that in the unadjusted figure. The contraction in net borrowing seems much larger, but that is almost entirely due to the technical effect of the Royal Mail pensions transfer. In traditional terms, the Budget would thus be seen as moderately contractionary. But this simply continues a process begun by George Osborne two years ago. In fact, the biggest contractionary changes are due to take place from 2013 onwards. The argument between those who, like the chancellor, see the Budget balance as a test of national solvency, and those of us who see it as a policy variable, will not be quickly concluded. But I cannot help noting that the one good point made by the leader of the opposition, Ed Miliband, in a speech ridden with class warfare, was the contrast between the growth rate of the UK, where the Osborne approach prevails, and the higher rate achieved in the US, where something nearer fiscal activism prevails. Be that as it may, the job of regulating demand to achieve non-inflationary growth has been left to the Bank of England's monetary policy. This is not the unique experiment that some commentators suppose. Something similar was always the BoE's task, even though through much of its history it was hamstrung by the need to support a fixed exchange rate. But even with that inhibition removed it has not been doing too brilliantly. So, far from flooding the economy with printed money, as misguided City fundamentalists assert, the broad money supply has been falling by about 2.5 per cent a year for the past year and a half. The more fundamental measure of nominal GDP has been rising by slightly less than 3 per cent a year, compared with the 5 per cent minimum required for non-inflationary growth, not to speak of the case for making good past shortfalls. It may be a cliché to say that the BoE should have been lending directly to the business sector, instead of just purchasing gilt-edged securities from the commercial banks. But clichés are merely oft-repeated truths. As for the "robbing Peter to pay Paul" aspects of the Budget, they seem to be roughly in the right direction. The real criticism of the cut in the top basic income tax rate from 50 per cent to 45 per cent is that Mr Osborne did not go the whole way and reduce it to the 40 per cent rate it was at for most of the past few parliaments. The chancellor has chosen to be hung for a lamb when he could have been hung for a sheep. Anyone who thinks that the 50 per cent rate struck at the real fat cats needs to have lunch with their accountant. The populist support for the higher rate reflects not merely jealousy and envy, but ill-informed jealousy and envy. To be fair, anybody who thinks that the cut to 45 per cent will unleash a torrent of entrepreneurial energy is similarly misinformed. Am I too dogmatic? No, for as Benjamin Franklin once said, "in this world nothing can be said to be certain, except death and taxes."