Budget snap reaction.............

The UK Budget contained some rather bolder policy measures than had been expected - not least the cut in the basic rate of income tax from 22p to 20p (announced for next year), the rise in the higher rate threshold, and the cut in corporation tax. Mr Brown clearly intended to go out with a bang.  

But what he gave with one hand, he took away with the other. The giveaways are fully offset by various revenue raising measures, including the scrapping of the10p lower rate band, the rise in the national insurance threshold, and changes in capital allowances.  

As such, the Budget is very much the neutral package that the markets anticipated (FTSE100 up 33.5 at 15.15hrs) against the background of a pretty poor fiscal position. The key point as far as the economy is concerned, though, is that public spending growth is set to slow very sharply over the next few years, from rates of close to 5% per annum in real terms to around 2%. As such, for all Mr Brown's bluster, the bottom line is that the enormous fiscal boost seen over the last five years is well and truly over. This won't stop interest rates rising again in the near term (May?), but might point to looser monetary policy further ahead.

Prometheus from sources: ADM, Barclays Capital, Cazenove, Charles Stanley, HSBC, ING, SocGen, UBS.