Macroscope | UK budget fails to impress in absence of sweeping changes

The budget is generally one of the most eagerly awaited, closely scrutinised and over-hyped events in the British political calendar. Last week's offering by Chancellor George Osborne was no exception. Hailed as the first true Tory budget in 20 years, it was supposed to build his reputation as a radical reformer and cement his claim to be future prime minister.

It was hardly a triumph of Tory reform. The window dressing was overdone and the measures announced were a far cry from a manifesto of sweeping change. This was an austerity budget, limited by economic necessity and characterised by cuts to welfare spending to set Britain's badly battered public finances back on the road to recovery.

Back in the early 1980s, former Conservative prime minister Margaret Thatcher set the bar very high as a role model for sweeping change, seeking to overhaul the economy with her vision of free markets, lower taxes and a small state. For future neo-liberal reformers, she would be a hard act to follow in terms of transforming Britain into a haven of free enterprise.

Central to Thatcher's grand plan was the creation of a second British industrial revolution. When first elected into office in 1979, the country was crying out for change. A rundown manufacturing economy, with stagnating productivity, dominated by trade unions and crippled by an overblown public sector, were the tip of the iceberg of problems facing the Tory government at the time.

What differentiated Thatcher were her drive to hector through unpopular policies to muster change. The slash-and-burn policies of tough Thatcherism wrought a toll on the economy as restrictive monetary and fiscal policies, bitter confrontation with the trade unions and deep restructuring led Britain into double-digit unemployment and deep recession before recovery finally took hold.

Today the myth of Thatcherism barely passes the test of time. Despite a flurry of economic recovery in the past few years, there are real worries about sustainability, with too much British growth in the past 30 years built on excessive credit, risky banking practices and speculative property bubbles.

The decline in manufacturing has continued unabated and there are few signs of any homespun industries sprouting up to fill the void. The true long-run growth rate is still little more than 2 per cent right now.