Page last updated at 09:24 GMT, Wednesday, 31 March 2010 10:24 UK

City Diaries: 31 March

Man looking at a falling graph

So what did those in the City make of the Budget? Our diarists give their reaction.

These diaries are written by people who work in finance and have had a front row seat as their industry goes through the biggest changes in decades.

They give us regular insiders' updates on the mood in the City of London and the dramatic changes in the world of finance.


Laura (not her real name) works for a commercial bank in London

Piggy bank with a fifty pound note
"The budget has had zero impact on bank world"

When the amount of money you are paying in interest is bigger than the budget for the defence of your nation or the education of your children, one might have thought that it would be a good idea to sort this out sooner rather than later. If the interest on your credit card debt was higher than say your mortgage you would rightly be worried.

The budget this week was neither terrible nor brilliant and I think the relative lack of reaction in the markets reflects this - it was almost a nothing budget and confirms that the real budget has yet to be outlined.

Many of our customers have had a drop in turnover over the last 18 months and much of what we do when trying to work out whether to lend them money or not is based on projections and the management strength of the business. If I try and apply these banking rules to the budget and current government, I would say on both counts they fall short.

Firstly projections: Projected growth of 3%-3.5% is hardly credible when this growth rate was not achieved in the 'boom' times. This has serious implications for the ability of the UK to 'inflate' or 'grow' away its debt. This is particularly true given the public sector cull in jobs has yet to begin and unemployment is still rising in certain areas of the UK such as Wales and the North East - both areas with higher underlying worklessness at the best of times.

Job creation

As with the bank bailout, it is the taxpayer who will drive any economic recovery not the government

Secondly, management: If the MD of a company failed to make provisions when the business was profitable and sold off assets at below market price these could be interpreted as management errors. In difficult economic times we need politicians of all colours to work together with the best business and economic brains they can find and take the opportunity to be bolder in their thinking. Please don't think this is an endorsement of a hung parliament - I'm not sure our political parties are designed to work together on a formal basis and are more like oil and water.

The next five years need to be focussed on job creation and increasing the employment prospects of the 17.5% of 18 to 24-year-olds who are not working or learning and making better use of the over 50s out of work so that the hit on pensions as a result of share price crashes doesn't turn into a massive bill for the taxpayer 10, 20 and 30 years down the line.

Waiting game

Back at the ranch, the budget has had zero impact on bank world and negligible impact on our customers' expectations (although several are worried about the 1% National Insurance increase next year). Having a £1,000 odd reduction in business tax for start-ups will help some but will not make it anymore likely for us to lend to them. Unless somebody has a chunk of cash to put in their business or equity in their home to support an overdraft, banks still aren't going to be falling over themselves to lend money to this risky business group.

It is now a waiting game to see what April's campaigns and the election result brings. As with the bank bailout, it is the taxpayer who will drive any economic recovery not the government, whoever is in charge.


"Mark" (not his real name) works for a stockbroker outside London.

A protestor from the "Robin Hood Tax Campaign," dressed as "Robin Hood,"
"Comparisons between Alistair darling and Robin Hood were irritating"

The comparison between Alistair Darling and Robin Hood frustrated the life out of me during the recent coverage of the budget. Governments are there to redistribute wealth, so there will always be an element of taking from the rich to help the poor. This is part of their role so it is a lazy and uneducated comparison to make.

It is fairly easy to pick holes in the budget and a good place to start is with the £100m announced to tackle pot holes. As someone that has to drive along country roads to the office, I would have been happier to see that figure more than double. It is amazing that the Romans built roads, walls and pathways that have lasted hundreds of years yet a cold winter and our roads are in state of disrepair. However, I think most people noted it was £100m he did not have.

Housing market

For sale signs
"Cutting stamp duty was more of a headline grabber"

House builders got a welcome boost with the news that first time buyers will not pay stamp duty on homes up to the value of £250,000. I suspect this is a welcome boost for those living in the capital although those outside the South East will look at £250,000 as a fairly sizeable amount and I feel more could be done to help home owners and new people to the market rather than just increasing the stamp duty limit. As with most things to do with the housing market, any benefit will be a slow one, although in my opinion, this was more of a headline grabber than a major positive.

Green investment

For those holidaying in Europe this summer, worrying analysis of the budget, particularly the affordability of the budget and whether Darling has his forecasts correct, may cost you more as doubts arise about sterling. I am avoiding Europe this summer for holidays as the Euro is getting closer and closer to parity with the sterling. This trend may continue which is bad for those that import goods from the continent.

I said in my pre-budget comments, I was looking for something in the 'green' arena and also for the unemployed. I was delighted that a green investment bank has been set up. Britain has a great and proud history of innovators and I think this will bring out the next generation of entrepreneurs. With Nissan announcing that its electric car, the Leaf, will be produced in Sunderland, safeguarding thousands of jobs, the green investment bank is likely to be a big boost to regional economies.

The next few months will be interesting in terms of the looming election. Whoever wins, please, please appoint a Chancellor that can "perform" the budget rather than just read from a script!

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