This year’s Budget was presented against an extraordinary global backdrop. An (albeit-imperfect) rules-based global order is rapidly unravelling. This creates both near-term uncertainties and medium-term concerns. Near-term uncertainties because as the rules of the game get suddenly, and arbitrarily, rewritten, markets are getting whiplashed on a daily basis. Which country will be the victim of the next set of tariffs? Is there any risk-free asset left in the world?

Will muscular industrial policy in developed economies successfully jawbone global capital back? Medium-term concerns because the political and economic balkanisation that this will inevitably engender is inimical to specialisation and exchange that underpinned the last 80 years of prosperity, notwithstanding the accompanying warts of heightened inequality and unsustainable imbalances. Generating growth in a world that is splintered will be hard.

So how should economies respond to these impulses? Heightened near-term uncertainty would argue for hunkering down: to build buffers and be fiscally and monetarily conservative to weather the external storm. But a more bleak medium-term global growth outlook would argue for the opposite—be more adventurous and expansive to avoid getting dragged down into mediocrity. This is especially so because economic heft is the key to geopolitical leverage in this brave new world.

This, then, was the tension confronting this year’s Budget. To be conservative and aggressive at the same time. One way to achieve this division of labour was to be conservative on the fiscal math but more expansive and adventurous on policy reforms.

The first task was achieved. Despite direct........

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