Wednesday Mar 3 2021 14:27
5 min
“That which we are, we are”. Rishi Sunak channelled Tennyson and the wanderer Ulysses in one fell swoop to sum up his Budget. I’m none the wiser.
Given the ‘rabbit in the hat’ was the launch of a cluster of free ports, you could be forgiven for thinking this Budget to reset the economy for a post-Covid and post-Brexit world was way off the mark. Free ports are not what the chancellor, who has championed them for some time despite evidence suggesting they deliver marginal benefits, thinks they are.
Fixing the public finances. Do whatever it takes. Full measure of our fiscal firepower. Don’t let underlying debt rise ‘indefinitely’. A freedom to act – a freedom to raise taxes. All pretty orthodox stuff. There was tough talking but for now no real pain – the payback comes later. Maybe Sunak has been reading Kelton lately after all, but he did try to disguise years of central bank accommodation and, during the pandemic, direct monetary financing by the BoE, as ‘Tory fiscal rectitude’. Political point scoring has not gone away but on the whole there was a lot of good stuff in here for kick-starting the economy.
Markets
Not a huge reaction overall – a lot had been pre-released and let’s face it the bond vigilantes ain’t what they used to be. Longer-dated yields did move – 30-year gilt yield up 9bps to 1.31%, but 10-year gilt yields ticked lower all morning and slid to LOD after the chancellor began talking but were still up 7-8bps on the day around 0.765% having opened up higher. Implication from the OBR is that we get better growth leading to less borrowing now, but longer-term borrowing likely to remain high. The FTSE 100 ticked lower through the speech having tested its highest in a week earlier this morning. Larger-than-expected hike to corporation tax maybe a factor here but we have seen a broad move lower in European markets and US futures in the last hour or so . The FTSE 250 also eased back off its highs but remains up +1% today. GBPUSD was around 1.3950. Shares in pubs and housebuilders were higher, Lloyds and Barclays both advanced too as banks picked up.