The pounds 3.2bn reduction in government expenditure is welcome and although I hoped for more, it indicates our resolve to power the burgeoning cost of government. Furthermore, the lowering of taxes is very welcome and fully in line with Conservative instincts. With 26 million people benefiting from this, then the economy will also benefit. This, however, cannot be the end of the story, for I expect over the next 12 months we will see continuing pressure from the Treasury for budget restraint, and then later next year further reductions to make room for further tax cuts. Yet this Budget was twin-pronged. The first prong was Tuesday's cautious, though very welcome, move back into tax reduction, and the second is a reduction in interest rates - to work effectively, both prongs are necessary.
Last year the Bank of England panicked about a surge in raw-material prices and put huge pressure on the Chancellor to raise interest rates in anticipation of inflationary pressure. There was an initial rise but that was not enough for the Bank; it continued on right up to the end of this summer with its insistence on interest-rate rises.
What has become clear is that the Bank was quite wrong, the expected surge in inflation did not happen. Instead, the early interest-rate rises and the effect of the lottery have resulted in a slowdown that has led to smaller-than-expected government receipts. Thank God, the Chancellor rejected any further interest-rate rises this year and now the Bank admits it was wrong.
With the most stable economic performances for a generation, the British economy is poised to benefit us all. However, to reap that benefit we need to boost growth rates, and to do that, given the scale of the tax cuts, the economy now needs a reduction in interest rates. That requires stability in the markets, and that is what Tuesday's Budget was in part about.
Most important, once applied, it is a strategy that, over the next 12 months, will convince the public that this is a Conservative government which not only wants people to take more power over their own lives but can deliver. To win the next election the public needs to realise that a move to Labour would be a gamble that it could not possibly afford.
I await Christmas with great expectations.
The writer is Conservative MP for Chingford.Reuse content