Budget 2013: Steady as she goes – aground

As expected, the backdrop to this Budget was yet another downward revision to the OBR’s growth forecasts. This downgrade strikes us as fully justified. Indeed, we are even more pessimistic than the OBR about immediate growth prospects. We are also more pessimistic about the prospects for borrowing. Parts of the financial markets may be reassured that there has been no borrowing splurge. But the feeling is growing in the markets that the biggest threat to the public finances, and hence to gilt yields, lies with the continuing absence of real economic recovery. We agree.