The speech: What Osborne said – and what he really meant

John Rentoul reads between the lines of the Chancellor's speech

"Mr Deputy Speaker, last year's emergency Budget was about rescuing the nation's finances and paying for the mistakes of the past. Today's Budget is about reforming the nation's economy, so that we have enduring growth and jobs in the future.

And it's about doing what we can to help families with the cost of living and the high oil price. We understand how difficult it is for so many people across our country right now. That we are able now to set off on the route from rescue to reform – and reform to recovery – is because of difficult decisions we've already taken.

Those decisions have brought economic stability. And without stability there can be no sustainable growth or jobs. Without stability governments have to keep coming back to their citizens for more – more taxes and more spending cuts.

In Britain, we do not have to do that today."

What he really meant The frame for the speech: we did the hard stuff last year – never mind that hardly any of it has come into effect yet – so today I'm just tweaking the well-oiled machine.

"We inherited a record budget deficit. But we have set out a credible, comprehensive plan to deal with it. We have had to undertake difficult measures. But we have already asked the British people for what is needed, and today we do not need to ask for more. So this is not a tax-raising Budget. But nor can we afford a giveaway. Taken together, the measures I will announce today are fiscally neutral across the period. This is a Budget built on sound money; a Budget that encourages enterprise; that supports exports, manufacturing and investment; that is based on robust independent figures; a Budget for making things, not for making things up.

Let me start with... growth forecasts. It has been known for Chancellors in recent years to rattle these off at great speed, in the hope that no one will keep up. I will not do that."

What he really meant One of several unsubtle digs at Gordon Brown. In fact, the speed of delivery made no difference: no normal human can follow lists of numbers for the next four years consecutively. It's all in the Treasury documents anyway.

"Although average quarterly growth this year is set to be higher than was previously forecast, the annual forecast for 2011 has been revised to 1.7 per cent. This the OBR [Office for Budget Responsibility] attributes specifically to the weaker than expected final quarter of last year, the rise in world commodity prices and the higher-than-expected inflation in the UK.

However, the OBR point out that the effect, in their words, "creates scope for slightly stronger growth in later years" than previously forecast. So while they expect real GDP growth of 2.5 per cent next year, they forecast it will then rise to 2.9 per cent in 2013, to 2.9 per cent in 2014, followed by 2.8 per cent in 2015.

I turn now to the fiscal forecasts for our debt and deficit. Borrowing to fund the deficit this year is now set to come in at £146bn, below target, then fall to £122bn next year, then £101bn the year after.

Inflation has had its impact, but crucially the OBR assess that next year's structural deficit remains the same as forecast last November. In other words, the size of the task of repairing Britain's finances is unchanged.

Our national debt, as a share of our national income, is forecast to be 60 per cent this year, before peaking at 71 per cent, and then starting to fall – reaching 69 per cent by the end of the period.

In July last year, we set up the Office of Tax Simplification to provide independent advice on how to reduce the complexity of the existing system. Following their recommendations, I can announce today that this Budget abolishes no fewer than 43 complex reliefs. This includes the "millennium gift aid system" – which we won't need for another 989 years."

What he really meant A rhetorical flourish, and a joke, in an attempt to present himself as a great tax simplifier - an effect spoilt cumulatively by the rest of the speech.

"I have decided not to follow their advice to abolish the Community Investment Tax Relief – and instead I encourage people to take it up. But this Budget at a stroke removes over 100 pages from our tax code and begins the work of simplification.

For decades, we have operated Income Tax and National Insurance as two fundamentally different taxes and forced businesses large and small to operate two completely different systems of administration, with two different periods and bases of charge. The resulting anomalies are legion.

So I am announcing today that the Government will consult on merging the operation of National Insurance and Income Tax. Our purpose is not to increase taxes, it is to simplify them. And this huge task will therefore require a great deal of consultation and take a number of years to complete. But it is time we took this historic step to simplify dramatically our tax system and make it fit for the modern age."

What he really meant Overselling a consultation on merging the administration of two different taxes shows how thin this Budget was. Even though it had been leaked in advance, the Conservative benches still cheered.

"Again, let's face facts. Other countries are quite deliberately making their tax systems more competitive and attracting multi-national companies away from the UK. We could stand there and do nothing. But increasing the living standards of every hard-pressed family in the country depends on keeping those companies and the jobs and the investment and the tax revenues that come with them, here in the UK.

I want Britain to be the place international businesses go to, not the place they leave. So I can today announce that from April this year corporation tax will be reduced not just by 1 per cent as I previously announced but by 2 per cent.

And it will continue to fall by 1 per cent in each of the following three years – taking our corporate tax rate right down to 23 per cent. Let it be heard clearly around the world – from Shanghai to Seattle and from Stuttgart to São Paolo: Britain is open for business."

What he really meant The cliché count rises. Gordon Brown said it often enough too when he was in charge. Funny how the rest of the world doesn't seem to take a blind bit of notice when this sort of thing happens.

"And to ensure that this is not a net tax cut for banks, I am adjusting the bank levy rate next year to offset its effect."

What he really meant "Open for business", that is, except for banks. Banker-bashing is too big a domestic industry not to receive special protection. The Labour benches fell silent. The Tories cheered and hear-heared, precisely because it was the opposite of everything in which they believe.

"In each and every year of this Parliament, our permanent bank levy raises more than the one-year bonus tax of the last Parliament.

The most competitive tax system in the G20 is the first of our economic ambitions. The second is that Britain becomes the best place in Europe to start, finance and grow a business.

So in today's Plan for Growth we take action. £350m-worth of specific regulations will go – including the Equality Act's costly dual discrimination rules. Lord Young's recommendations on health and safety laws will be implemented in full.

The no-win no-fee legal services that prey on employers will be restricted. Existing regulation will be scrutinised by the public.

And we are going to tackle what every government has identified as a chronic obstacle to economic growth in Britain – and no government has done anything about: the planning system."

What he really meant Ah yes, we read about this in the newspapers over the weekend. Fortunately the details of the great drive to build on every remaining bit of green space in the South-east turned out to be a feeble list of bullet points that will change nothing.

"Councils are spending 13 per cent more in real terms on planning permissions than they did five years ago, despite the fact that applications have fallen by a third.

Yes, local communities should have a greater say in planning, but from today, we will expect all bodies involved in planning to prioritise growth and jobs. We will introduce a new presumption in favour of sustainable development, so that the default answer to development is "Yes".

We will retain existing controls on greenbelt – but we will remove the nationally-imposed targets on the use of previously developed land.

The lack of start-up capital has been a long-standing problem in the British economy. So today I announce sweeping changes to improve the generosity, the simplicity and the reach of the Enterprise Investment Scheme."

What he really meant As the Historic Tax Simplifier spoke, adding to tax reliefs he had promised to sweep away, we could hear a rattling that sounded like, "tinker, complicate, tinker, fiddle". It was like Gordon Brown all over again. With a more irritating voice.

"To end the speculation and uncertainty and to provide stability, I confirm that I will be making no further changes to the taxation of non-domiciles in this Parliament. In an age when businesses and capital and people can increasingly move anywhere, high tax rates can do real damage.

I am clear that the 50 pence tax rate would do lasting damage to our economy if it were to become permanent. That is why I regard it as a temporary measure. Just as my Labour predecessor, the Right Honourable Member for Edinburgh South West [Alistair Darling], did when he introduced it. I've said before that now wouldn't be the right time to remove it, when we're asking others in our society on much lower incomes to make sacrifices. For we're all in this together."

What he really meant All Budgets need a bit of naked politics, and this was Osborne's. He tried to drive a wedge between Ed Miliband, who wants the 50p rate to be permanent, and his shadow Chancellor, Ed Balls, who has supported Darling's declaration that it should be temporary.

"But I think it's sensible to see how much revenue it actually raises. I've asked HMRC to find out the truth when the self-assessment forms start coming in. Of course, taxation must be fair. It's right that the wealthiest should pay more than others. And it's especially wrong when they avoid taxes.

I'll have more to say later on tax avoidance and evasion, but there's one area that needs extra work in the coming months and that's on the taxation of very high value property, where evasion and avoidance are widespread and some of the wealthiest are not paying their fair share. So as well as reviewing revenues from the 50p tax rate, we will also be redoubling our efforts to find ways of ensuring that owners of high value property cannot avoid paying their fair share.

But average mortgage deposits are close to 30 per cent and this puts home ownership beyond the reach of many many families. This is not fair. So I can announce that – from the proceeds of this year's bank levy – we will fund a £250m commitment to first-time buyers. A new shared equity scheme, First Buy, will be available for first-time buyers who want to purchase a newly-built property, but who cannot afford the high deposits. This will help 10,000 families get on to the housing ladder for the first time."

What he really meant This sounds good news, but the Chancellor of the Exchequer and the best brains of his Treasury team must know it is nonsense. Until more houses are built in the UK, then getting 10,000 families on to the housing ladder means that 10,000 other families will have to get off it. At a cost to the rest of us of a quarter of a billion.

"We will go ahead with the £85m Ordsall Chord scheme, linking Manchester's Victoria and Piccadilly stations and significantly reducing journey times between Liverpool and Leeds.

We can commit to – and I know many HMs [Honorable Members] have been calling for this – the Swindon to Kemble redoubling scheme. And this will complement our electrification of the Great Western Main Line to Wales. And we can find another £100m to help councils repair the winter potholes on our roads."

What he really meant Oh yes, we read about that too. And we do think the roads are in a terrible state at the moment. But hold on: hasn't the Coalition abolished ring-fenced budgets for local councils? Or will there be an orange plastic fence around this one?

"Helping all parts of our country succeed is also the purpose behind the new Enterprise Zones we launch today. Mr Deputy Speaker, there have been reports that we would be able to fund 10 new Enterprise Zones. Today I confirm that instead we will fund instead 21 new Enterprise Zones. The first 10 Enterprise Zones will be in urban areas of highest need but also potential. In Birmingham and Solihull, Leeds, Liverpool, Greater Manchester, the Tees Valley, Tyneside, the Bristol area, the Black Country, Derbyshire and Nottinghamshire and Sheffield. Tomorrow, my RHFs the Prime Minister and Deputy Prime Minister will announce some of the specific locations of these new Enterprise Zones."

What he really meant An old Budget trick: leaving the most significant item to last. Here we have a hand up, not a hand-out, to Nick Clegg - an Enterprise Zone in his constituency to compensate for the Sheffield Forgemasters' disaster, with the Deputy Prime Minister to announce the details himself.

"Mr Deputy Speaker, let me now turn to personal taxes and duties. And let me start by noting that a society should not just be judged by the strength of its economy, but also the compassion of its people – well, that's what I happen to think, anyway. The Culture Secretary and I have been working on a series of substantial reforms that will support giving, from the largest donations to the coins collected in the charity bucket.

First, we will dramatically simplify the administration of Gift Aid. Instead of asking charities to submit a written record of every donation made, we will by 2013 pay for a much easier online system. Second, we will encourage wealthy people in our society to give even more. But our charity does not extend to those in our society who seek to avoid paying their fair share of taxes."

What he really meant This link from the taxation of charitable donations to the issue of tax avoidance is one of the worst in modern Budget history.

"Tax avoidance and evasion mean that we have to ask more from working families. And that is not fair. Unfortunately, not enough has been done in recent years to tackle this injustice. HMRC estimate that £14bn was lost through avoidance and evasion in 2008.

I turn now to... excise duties. Rates of vehicle excise duty will increase by inflation only – and we will freeze rates for Heavy Good Vehicles to help our hauliers. I am also proposing to increase the Approved Mileage Allowance Payments. This mileage rate has not increased at all since 2002, making those who depend on their car for work increasingly worse off. It will now increase from 40 pence to 45 pence per mile.

And I can tell the House that we will extend this relief to cover volunteers travelling as passengers – as charities and others have been calling for over many years. All other duty rises will remain exactly as planned by the previous Government. Except Fuel Duty. The price of petrol has become a huge burden on families. In the last six months, the cost of filling up a family car such as a Ford Focus has increased by £10."

What he really meant Another traditional device of Budget oratory - no changes to announce… except for one. Followed by a folksy downgrade of Tony Blair's old Mondeo Man real-world example - Focus group politics is alive and well.

"Let's be clear about what's within our control and what is not – so we don't raise false hopes. British Governments are not in charge of the world's oil price. As we've seen, events like those in the Middle East can push the cost of petrol at the pump higher. But British governments are in charge of the duty we levy on petrol. And the previous Cabinet put in place before they left office a new fuel duty escalator that involved seven fuel duty increases. Three have already taken place, adding just over 3p to the price of petrol. The third step on the escalator is due to come into effect next week and that would add almost another 5p to the price of a litre of petrol.

I have made it clear that I would listen to the concerns put to me by so many people. Many have suggested that we should use the extra revenues we automatically get from the North Sea.

It's true that they go up when the oil price rises, but the OBR confirms that rising oil prices also cause other tax revenues across the rest of the economy fall by a similar amount."

What he really meant Unexpected serious mini-seminar on economics in the middle of the politics: it turns out that the Exchequer doesn't get a windfall gain from high oil prices after all.

"And one final thing. As well as stopping these fuel duty rises I am today cutting fuel duty by one penny per litre. This will take effect in petrol stations from 6pm tonight. I know that by itself this will not end the pressure on family budgets. But we've done what we can to help."

What he really meant The build up to the coup de théâtre was as long and unsubtle as a Led Zeppelin concert ending, and produced the feeble mouse of a penny off a litre of petrol - which Osborne seemed to acknowledge immediately by the slightly plaintive "done what we can".

"We are only going to raise the living standards of families if we have an economy that can compete in the modern age. So this is our plan for growth. We want the words: "Made in Britain, created in Britain, designed in Britain, invented in Britain" to drive our nation forward; a Britain carried aloft by the march of the makers.

That is how we will create jobs and support families. We have put fuel into the tank of the British economy. And I commend this Budget to the House."

What he really meant From the witless cliché of "Made in Britain", made less original by the variations added, via the tedious motoring analogies to the hideous and clashing phrasecraft of "carried aloft by the march of the makers", this was the most appallingly crafted, third-rate peroration of any parliamentary set piece I have had the misfortune to witness.

This is an edited extract of the Chancellor's speech

Buzzwords

Tax(es/ation) x99

Growth x23

Fair x14

Jobs x10

Competitive(ness) x9

Entrepreneur(ial) x4

Hard-pressed family(ies) x2

Recovery x2

Innovative x1

Hard truth x1

Nigel lawson x1

Adam Smith x1