IT WAS the first time in several years that a chancellor of the exchequer did not have to reveal more bad news about Britain's finances. On March 21st, when George Osborne delivered his third budget, the official forecasts for the economy and public borrowing were barely changed. And Mr Osborne offered little in the way of direct stimulus to the economy. His budget gave away a few billion but will eventually raise as much through other measures. Yet through a handful of astute tweaks to the tax system, coupled with an “unwavering” commitment to cutting the deficit, the chancellor tried to send a strong signal that Britain is a profitable place to invest.

The bravest measure was a cut in the top rate of income tax from 50% to 45% from next April; the costliest was a £1,100 ($1,745) increase in the personal tax-free allowance; and the signature measure was a further reduction in the main corporate-tax rate (see table). The other biggish cost to the exchequer was a partial U-turn on child benefit. This was to be taken away from families with a higher-rate tax payer, but will now be gradually withdrawn from those earning more than £50,000.

These giveaways were paid for by raising other, smaller taxes—including higher stamp duty on extremely expensive homes—and by closing loopholes. The most complained-about measure was a freezing of tax allowances for old people. Further money was found by diverting part of the spending reserve that had been set aside to fund fighting in Afghanistan. Eye-catching as these changes are, they made little difference to the overall fiscal stance. The net cost of the budget changes in 2013-14 will be a modest £1.7 billion, barely more than 0.1% of GDP. The Treasury reckons there will be a slightly larger economic stimulus in 2012-13, as the well-paid find ways to defer their taxes until next year when the top income-tax rate comes down. But the modest upfront costs of the measures will be clawed back in subsequent years as a new cap on tax reliefs for the well-off comes into effect from April 2014. Over a five-year horizon, the budget is a neutral one. The chancellor judged he had no room to depart more radically from his plan to cut the budget deficit if he is to preserve Britain's AAA government-bond rating, which is under review by two of the three main credit-rating agencies. But at least the public finances look in no worse a shape than they did when Mr Osborne gave his autumn statement in November. The Office for Budget Responsibility (OBR), the fiscal watchdog, now reckons that borrowing will be £126 billion (8.3% of GDP) in 2011, a billion less than it forecast four months ago. Hopes that it might be smaller still were dashed by high borrowing figures for February, released on the morning of the budget, which made the previous ten months' returns look rather less healthy. The OBR nudged up this year's GDP growth figure from 0.7% to 0.8% and continued to forecast a slowly strengthening recovery. The path of deficit reduction is little different either. Public borrowing is expected to decline to just above 1% of GDP by 2016-17, just as it was in November. The one new kink is that the borrowing figures for 2012-13 will be flattered by the transfer of £28 billion of assets from the Royal Mail, as the state takes on the firm's pension promises (estimated at £37.5 billion but not included in public-debt figures) to make it more appealing to potential investors.

The macroeconomic effects of this budget are fairly mild: over time it neither injects nor withdraws much demand from the economy. But what of the microeconomics, its impact on incentives? A mere £5 billion of tax cuts paid for by other savings can hardly transform the economy. Cynics will note that the OBR was not moved by the budget to upgrade its estimate of the economy's growth potential.

Lawson with a tinge of Brown

But within the confines of coalition politics and rickety public finances, the chancellor tried hard to spur growth. That the budget's costliest measure was aimed at reducing the tax burden on poor workers gave some political cover for unpopular tax cuts for companies and the rich. With confidence slowly returning to boardrooms, the twin signals of a cut in the top rate of personal tax and further progress in bringing down the corporate-tax rate might tip the scales towards business investment, where Britain lags other rich countries. It is big, global companies, not consumers and government, that have the spare cash to finance extra spending.

The drawback to the budget is that it took a lot of tinkering with small measures to pay for a few eye-catching ones. The principle of using taxes on wealth—in this case on high-end house sales—and reduced tax reliefs to pay for lower tax rates is a good one. But it was used on only a limited scale in this budget. That was in part because the full-year cost of reducing the top rate of tax to 45% was put at a paltry £100m (see article). A wholesale tax reform, including a merger of national-insurance and personal tax payments, which was again delayed by the chancellor, might have to wait until there is more money to lubricate the changes. Until then, Mr Osborne's less-than-purist approach to taxation has its benefits.