BY TRADITION the chancellor of the exchequer may drink alcohol during the budget speech, the only time of the year when any minister may imbibe in the House of Commons. On March 8th Philip Hammond stuck to water. But others were longing for a stiff drink as they watched his speech. He made a few good jokes but otherwise was monotone; he reeled off endless statistics (usually including the decimal point); and unlike his predecessor, George Osborne, he resisted the urge to pull rabbits out of his hat. Mr Hammond is in no mood to party, and for good reason. The economy is looking strong now but he knows that, with Brexit negotiations looming, things are likely to get worse.

Most economists had assumed that after the vote to leave the European Union the British economy would slow sharply. Heightened uncertainty would immediately deter investment and consumer spending, the thinking went. In its November forecast the Office for Budget Responsibility (OBR), the fiscal watchdog, reckoned that GDP growth in 2017 would be 1.4%—and that put it at the optimistic end of the spectrum.

The OBR has since revised its forecast to 2%, one of its biggest-ever upgrades. It reckons that in 2017 unemployment will remain around its current level of 5%, a slightly better reading than it gave in March 2016, when it assumed that Remain would prevail at the referendum. (Wage growth, however, will be much weaker.)

Three factors help to explain the economy’s resilience since the referendum. First, consumer spending has remained strong. With the benefit of hindsight this is unsurprising. Leave voters got what they wanted. And for Remainers, Brexit remains vague and some way off.

Second, businesses may be less worried about Brexit than economists had assumed. In two recent speeches Kristin Forbes of the Bank of England digs into the impact of uncertainty on economic growth. Following the referendum, there was a spike in a closely watched measure of uncertainty, built on analysis of newspaper articles. Yet this measure is weakly correlated with actual economic outcomes such as investment: what London-based journalists think is important may not matter much to a firm in Birmingham.

Other measures of uncertainty, such as those derived from surveys of firms, do correlate more strongly with economic activity. And these measures did not increase to nearly the same degree, Ms Forbes notes. Managers are perhaps too busy with their day-to-day jobs to worry about whether or not Britain remains in the EU’s customs union in 2019. Many saw little point in adjusting their plans in light of the Brexit vote. Firms which export their wares may even have felt more confident about their future, thanks to the fall in the value of sterling.

The third factor concerns finance. Greater uncertainty can prompt banks to reduce lending. Dearer finance hampers consumer spending and investment. After Britain voted Leave, however, firms’ funding costs if anything fell, partly because the Bank of England quickly relaxed credit. Indeed the worry now is that Britain, and especially its consumers, have over-borrowed.

Whatever the reasons, the stronger economic growth means juicier tax revenues. Thanks also to one-off factors, the OBR has handed Mr Hammond a fiscal windfall of £16bn ($19.7bn) over the current and next financial year (equivalent to about 2% of annual government spending). Borrowing in 2016-17 will be £52bn, about £16bn less than was predicted in November.

Taking away the punch bowl

Some hoped that the chancellor would take advantage of his stronger fiscal hand to boost spending, in particular on the National Health Service, which is struggling in the face of its tightest-ever financial squeeze. Mr Hammond offered a smidgen of extra NHS funding and channelled an extra £1.2bn in 2017-18 towards social care, which will ease the burden on hospitals.

That was by far Mr Hammond’s biggest new commitment. He made much of a tweak, costing £200m-odd in 2017-18, that will lessen the impact on firms due to pay higher business rates (a tax on property) in April. Mr Hammond also started to harmonise the way that self-employed and employed workers are taxed, generating a bit of extra revenue and a lot of outcry (see article). All in, though, this was one of the least fiddly budgets in memory; the document itself was less than half as long as Mr Osborne’s last.

By maintaining an austere stance, Mr Hammond has now amassed what is being called a £26bn “reserve”. Contrary to what is implied, that is not a piggy-bank of free cash. Instead it is the difference between two things: the OBR’s forecast of the budget deficit, adjusted for the economic cycle, in 2020-21 (£19bn); and the chancellor’s self-imposed limit for that measure in that year (£45bn or so).

Nonetheless Mr Hammond will be glad that he can increase spending if need be and still meet his fiscal goal. No one has the foggiest idea how the economy will perform from 2018 onwards, when the terms of the post-Brexit settlement become clearer. For now the government’s strategy remains vague. Even the OBR appears to have no answers to the simplest questions, such as the terms of the deal hammered out with Nissan, which has pledged to keep making cars in Sunderland. Its best guess is that GDP growth will average just under 2% in 2018-21.

Yet the OBR’s outlook is rosier than that of most economists. Judging by its forecasts for trade and immigration, the OBR appears to be assuming a “soft” Brexit, where Britain retains some form of membership of the EU’s single market and access to its workers. But the government has signalled otherwise; Britain could even quit the EU with no trade deal at all.

In the event of a hard Brexit, Mr Hammond could deploy his fiscal reserve, but it would not be enough to offset fully a serious slowdown. Even a mild recession would force him to spend it quickly. Britain also faces a large “Brexit bill” on quitting the EU. Beyond that, he has diminishing room to boost the economy: the ratio of public debt to GDP is already around 85%. The chancellor’s sober approach to budget-making is the right one. Still, if the economy is really buffeted as Brexit gets under way, he will only be able to do so much.