Sleight of hand fails to hide gaping holes in public purse
It was never going to be a classic giveaway Budget, but Gordon Brown still managed find enough tax ruses to hand more than £1.4bn to voters.
It was never going to be a classic giveaway Budget, but Gordon Brown still managed find enough tax ruses to hand more than £1.4bn to voters.
The Iron Chancellor became Gordo the Great Magician, using sleight of hand, illusion and conjuring tricks to show that - in defiance of political folklore - he has actually tightened the purse strings just 50 days ahead of a likely general election.
But he did nothing to assuage or even acknowledge mounting concerns that he is merely delaying multibillion-pound tax rises on voters soon after polling day. His only concession to the state of the public finances was to resist the temptation to splash out £3.5bn on a pre-election cut of a penny on income tax.
If anything Mr Brown made a virtue out of a necessity; he has almost no money left in the bank, so he gave little away. As widely expected, he handed tax cuts to young homebuyers, working families with children and pensioners, even buying them free bus tickets. To pay for this he slipped in a change to North Sea oil that nets him £1.1bn - paid back over the next three years - and pencilled a further £650m of savings by closing tax loopholes.
But he did nothing to address the big issue that separates him from almost all independent commentators: that his optimistic medium-term forecasts on growth and tax revenues mask the need for a £10bn tax hike. The Chancellor insisted he would meet his golden rule to balance the public finances when averaged over the economic cycle. But he cut the margin of error from £8bn in December to just £6bn.
"With our deficits lower than our competitors, lower than a decade ago - and with our debt lower than our competitors and lower than a decade ago - we are meeting both our fiscal rules in this economic cycle and the next," he told MPs
But this cut little ice outside Whitehall where analysts said he had not addressed a structural black hole in the public finances. Martin Weale, director of the National Institute of Economic and Social Research, said: "The Government has been slow to recognise the way in which the fiscal position has worsened over the last year."
The Chancellor said borrowing for the tax year ending next month would be £34.4bn, almost unchanged from the £34.2bn he forecast in December's pre-Budget report. Going forward, borrowing, with PBR forecasts in brackets, falls to £32bn (£33bn) in 2005-06, £29bn the following year (£29bn), £27bn (£28bn) for 2007-08 and £24bn (£24bn) for 2008-09. Finally he issued his first forecast for the 2009-10 fiscal year, pencilling in a £22bn deficit.
More importantly, he raised his forecast for the deficit on current spending by £3.5bn to £16.1bn, but cut it by £1bn in 2006-07, the final year of the cycle. "The shortfall is now expected to fall by £10bn rather than £5bn," said Simon Rubinsohn, chief UK economist at fund managers Gerrard. "It is hard not be a little sceptical about the extent of improvement projected."
The Chancellor made the numbers add up by cutting spending growth to 5.9 per cent from 6.6 per cent and raising revenue growth to 8.5 from 7.2 per cent. Malcolm Barr, UK economist at JP Morgan Chase, said Mr Brown had ignored all his recent fiscal forecasts that had turned out worse than expected. "If we get prolonged sluggish growth then I think we would find the fiscal rules would force the Chancellor to raise taxes despite having sub-par growth," he said.
The Chancellor stuck with his forecasts for economic growth over the next three years, not even bothering to waste words dismissing the gloomy outlook from City and academic commentators.
GDP growth in the current year will be within a range of 3 to 3.5 per cent, followed by 2.5 to 3 per cent next year and 2.25 to 2.75 per cent. The new forecasts still leave the Treasury far more optimistic than independent experts at City banks or in academia. The latest survey of economists by the Treasury published on Tuesday showed average independent forecast for growth this year is 2.6 per cent followed by 2.3 per cent in 2006.
Economists said the Treasury was betting the Bank of England would not start implementing rate rises that could halt the strong economic growth Mr Brown needs for the public finances. Andrew Smith, chief economist at KPMG, said: "The Chancellor is relying on the Bank to blink first, as last year. Mr Brown needs robust economic activity to meet his financial projections, but the Monetary Policy Committee [which pulls the interest rate lever] suspects continued above-trend growth will fuel inflation."
The Chancellor challenged his critics to prove him wrong andderided the Conservatives. "The Budget forecast for 2004 of growth at or above 3 per cent was said to be a deliberate misrepresentation of Britain's economic position," he said. "Not to meet it, it was said, would destroy credibility [but] I can report that growth in 2004 is as forecast: 3.1 per cent."
Every year, Britain's record economic performance under Mr Brown appears to improve by 100 years. Last year the Chancellor hailed the unbroken run of growth as the best since the Industrial Revolution. Yesterday he went further. "Britain is today experiencing the longest period of sustained economic growth since records began in the year 1701," he said.
In a reference to Arsenal's now-broken run of 49 matches without a loss, Mr Brown said the UK had gone one better with 50 successive quarters of growth, cunningly pulling a magician's cloak over the fact that 15 of those quarters were achieved under the Tories.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Budget 2015: George Osborne is set to get tough with further cuts in public spending
Five Questions On: GB Energy's new tariff
Simon Read: 'Taylor Swift tickets purchased on Viagogo were cancelled hours before the concert'
Simon Read: You're guilty until proven innocent when HMRC sends in the tax credit detectives
Bank-beating exchange rates on your international payments
- 1 BBC told new political editor must be 'impartial' with Nick Robinson reportedly stepping down
- 2 Number of young homeless people in Britain is 'more than three times the official figures'
- 3 Humans of New York image of crying gay teen receives best response yet from Ellen DeGeneres
- 4 The map showing the most dangerous tourist destinations in Europe, according to the Foreign Office
- 5 Swedish minister gives strongest case yet on why EU should stop turning away asylum seekers
More Britons believe that multiculturalism makes the country worse - not better, says poll
Nathan Collier: Montana man inspired by same-sex marriage ruling requests right to wed two wives
Greece crisis: IMF was pushed around by Angela Merkel and Nicholas Sarkozy – and now it is being humiliated
Forget little green men – aliens will look like humans, says Cambridge University evolution expert
Girl, 7, stares down hate preacher at Ohio festival with pro-LGBT rainbow flag gesture
Osborne to cap family benefits at £23,000 – announced ahead of his post-election Budget
iJobs Money & Business
£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...
£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...
£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....
£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...
Day In a Page
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.
This recently-refurbished three-bedroom home has bi-folding doors that lead out to a decked seating area - ideal for alfresco dining this summer.
Well-located for coastal walks and popular restaurants, this detached four-bedroom home offers views over farmland, to the Solent, the Purbecks and Bournemouth.
If you love high ceilings, school conversions like this one are bang on the money. This two-bedroom flat is minutes from Burgess Park and the foodie haven at Borough Market.
Set within a church conversion in Bermondsey, this two-bedroom maisonette combines existing features, such as original arches and brickwork, with a contemporary finish.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.