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Darling simply postponed the pain

Labour MPs waved their order papers and the Tories looked a little glum, but the Chancellor will have been most pleased by the markets' calm reaction to his latest, slightly lower estimates for public borrowing.

On the day that the Fitch credit ratings agency downgraded Portugal's ratings, Mr Darling was not only spared a similar humiliation, but the gilt market - key to funding the Government's massive programme of borrowing - retained its composure, with only a modest fall in the price of UK Government debt.

Sterling slipped back a little, mainly on factors affecting the dollar and the FTSE-250, which brings in a lot more British companies than the very international FTSE 100 index - finished up on Mr Darling's statement. He at least managed to avoid the sort of meltdown that might have accompanied a less adroit performance. The markets appear to have 'priced in' the fact that the really tough decisions will await the next government and the next Budget.

Mr Darling has cumulatively lopped £90bn off borrowing over the next parliament and can now declare that it has passed its annual peak, which was £166.5bn in this financial year - about £11bn less than forecast in the pre-Budget Report.

It is the first time Mr Darling has been able to report a substantial shortfall in borrowing, though it leaves the rate of borrowing at 11.8% of GDP, a peace time record, the most among the G7 major economies and not so far behind Greece's disastrous position.

Next year, 2010-11, borrowing will be down to £163bn, falling progressively to £74bn in 2014-15. The total national debt as a proportion of GDP is due to peak at 74.9% that same year. Overall, Mr Darling kept to expectations that he would stick to his original plan, set out last year and placed in special legation, of reducing the deficit by a half within four years, with the structural deficit - the part that cannot be explained away by the recession or investment in infrastructure - at down by two-thirds over the same timeframe.

Mr Darling has enjoyed two strokes of luck, or judgement perhaps. First is the smaller than expected rise in unemployment, which has helped income tax revenues and prevented the bill for benefits climbing even more steeply. Second, he is £2bn better off as result of his special tax on banker bonuses - about three times the yield first estimated.

Mr Darling might have been a little less content with that, as it was supposed to raise little because of its deterrent effect, but it has helped the headline-borrowing numbers. So the Chancellor allowed himself some scope for a £2.5bn "growth package" - though that only amounts to 0.2% of GDP and its overall impact may be slight.

As expected, Mr Darling also disclosed only a limited amount about where the new spending cuts would be found to reduce the deficit along the lines of his stated, legally-binding plans. At the moment many economists believe that the predictions rely too much on upbeat growth assumptions (which inflate GDP and flatter the borrowing figures as a proportion of national income), and unspecified tax increases and/or spending cuts to make the figures add up.

Around £20bn of savings were outlined - with £11bn in savings from efficiency programmes, £5bn of cuts in projects and £4bn from public sector pay restraint. Stephen Gifford, chief economist at Grant Thornton commented: "This Budget lacked detail on timings; which governments departments will feel the pinch the most, and where the cuts would fall first. We will have to wait until after the election for that. In the meantime, let's hope the ratings agencies for government debt are not too disappointed."

As for individual departments and spending programmes, Mr Darling repeated the Government's commitment to protect "frontline services" in the NHS, schools and policing - though without any explicit time limit for that protection. Given those, and the sacrosanct aim of increasing overseas aid to the UN target of 0.7% cent of GDP by 2013, cuts in other spending departments, especially those this large capital programmes such as housing, transport and defence, face swinging cuts, as does higher education. The independent Institute for Fiscal Studies (IFS) has put the Government's spending cuts at around £35bn, of which around half remains unaccounted and unspecified.

The IFS has said that if the Government sticks to its pledges on "frontline" services and aid, other departments face average real- terms cuts of over 6% a year - a far worse squeeze than befell them when Margaret Thatcher came to power in 1979.