The honesty that made backbenchers gasp

Budget Comment

There had been a big budget secret after all, announced at the end of his speech with the melodramatic flourish that no self-respecting Chancellor can ever resist. The announcement of more than pounds 3bn of new spending on health and education, two-thirds of it from the contingency reserve and a third from the windfall tax, thrilled Labour backbenchers. Moments earlier, some of them had gasped audibly when Gordon Brown had reaffirmed, in ultra-austere mode, that ministers would have to stick to the chafing control totals set by the previous government.

Even with the new money, spending constraints on the cherished priorities of health and education will still be dauntingly tough. But the new spending announcement helped to underline that after weeks of grandstanding on the international stage, the Government has not lost sight of its main domestic goals. It made it all the more difficult for the privatised utilities to complain credibly about the impact of the windfall tax: can BT, British Gas and the water companies really not afford to help schools in pre-First World War buildings? Even Kenneth Clarke, while attacking the concept of the windfall tax, was forced to admit yesterday that the use of pounds 1.2bn of it for school buildings was well judged. And the eager young Labour MPs elected in May fell on the announcement like thirsty desert travellers in an oasis.

The secret made something of a mockery of the largely synthetic parliamentary row over budget leaks which had delayed Brown's speech for 15 minutes. Blair and Brown had agreed last December that they would raid the contingency reserve for money to cushion the impact of the stark decision to stick to Kenneth Clarke's control totals for the first two years of the parliament. They did so after painstakingly checking with the most senior Treasury officials that the move would not undermine the Government's reputation for fiscal credibility. Neither the criticism on the left of Brown's hair- shirt announcement, nor the heat of the election campaign, nor the renewed expectations that a landslide victory had excited among some ministers, had dragged the secret out of them. Incredibly, it wasn't until Monday of this week that either of the two ministers most closely concerned, Frank Dobson, the Health Secretary, and David Blunkett, the Education Secretary, were told of the plan. The rest of the Cabinet didn't know until yesterday. Nor was it the only big surprise: the cut in corporation tax of 2 per cent, reducing the rate to a business-friendly level of 31 per cent, lower than that of Britain's major competitors, also never leaked.

As for the rest, the Budget was as striking for its consistency with previous economic statements, in opposition and in office, of both Brown and Blair. For all the huffing and puffing, for example, about abolishing tax breaks for private health care for the elderly, Brown had always made it clear that he intended to make that change to meet the costs of reducing VAT on fuel to 5 per cent. Indeed, it was a bit rich for the Tories to attack it. The tax break was invented by the Thatcherite No Turning Back group in the Eighties to open up the prospect of much wider incentives to the well-off to switch from the NHS to the private sector. And as such it had been forced through by Margaret Thatcher against the vociferous opposition within her own government not just of Kenneth Clarke and David Mellor, when they were health ministers, but also of Nigel Lawson, who regarded it as a hopelessly wasteful means of subsidising those already using the private health sector.

But those are details. The overriding impression of the Budget calculations is that Brown has, as promised, managed to be both radical and responsible. The windfall tax is on the high side of expectations, allowing him to do more - for the adult unemployed, for single mothers, and for the crumbling fabric of school buildings - than merely help the 250,000 young people who have been unemployed for six months or more. This is a big hit, albeit a popular one, against capital to pursue a social goal.

But at the same time Brown has shown that he is not prepared to use the one-club policy of interest rates to curb the kind of boom that the Tories failed to curb in the late Eighties. To do so would have risked putting the pound, through higher interest rates, up to a level that would have simply crippled British exports. Faced with the huge, pounds 25bn injection into the economy of the building society windfall payments, he decided to hike up individual taxes in a way that still leaves intact the manifesto pledges on tax rates. This provoked two entirely opposite criticisms yesterday. One, in the City, was that he had hit the corporate sector too hard and personal taxes not hard enough. Yet Treasury figures show that excluding the windfall tax, fiscal tightening will be pounds 3.4bn this year and pounds 4.1bn next year - not a small sum, particularly since around half of it is on individuals, such as the increase in stamp duty and cuts in Miras.

The other criticism, from the Tories, is that he has somehow broken the spirit of the manifesto by increasing personal taxation at all. The letter of the manifesto required him only to leave rates intact. He had always warned that this was not a pledge on the huge complex of reliefs and allowances, and the spirit also required the fiscal stability to which he has now ambitiously committed himself. Two tests await: will his tax increase avert the need for significant interest rate rises, and will the welfare- to-work programme work? If those tests are passed, then the Budget will be seen to have been not just well judged, but a triumph.

News
Kenny Ireland, pictured in 2010.
peopleActor, from House of Cards and Benidorm, was 68
News
A scene from the video shows students mock rioting
newsSchool leaver's YouTube video features staging of a playground gun massacre
Travel
travel
Environment
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Voices
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
Sport
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
News
Morrissey pictured in 2013
people
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Travel
travel
News
Robyn Lawley
people
News
people
News
i100  ... he was into holy war way before it was on trend
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmThe film is surprisingly witty, but could do with taking itself more seriously, says Geoffrey Macnab
News
people
Life and Style
food + drinkVegetarians enjoy food as much as anyone else, writes Susan Elkin
Finacial products from our partners
Property search
Sell it with flowers: competition is 'intense' for homes with outside spaces

Gardens add a tenth to the value of your home

A London estate agent yesterday put a price on having a garden. David Pollock of Greene & Co reckons it can increase a property's value by a tenth.

Spectators at the Isle of Wight music festival watch the World Cup on the big screen. Betting promotions were a feature of the tournament
Lenders have been accused of persuading vulnerable people to borrow expensive credit

Payday loan firms accused of bombarding vulnerable people with nuisance phone calls

Payday loan firms have been accused of bombarding financially vulnerable people with nuisance phone calls, after a debt charity reported that a third of its clients were plagued by the messages.

The foundation proposed that the Government sets up a scheme to help people avoid losing their homes

Mortgages: 'Homeowners could trade down to shared ownership to defuse rate rise timebomb'

A plan to defuse a “mortgage debt timebomb” when interest rates rise is published today amid warnings that 2.3m households could struggle with their repayments.

Current accounts are too costly and confusing, says CMA as it announces investigation into Britain's biggest banks

Competition regulator to investigate market where it's hard for customers to make comparisons and the big banks' charges can be set too high
All the signs have been pointing up for buy-to-let, but there are clouds on the horizon

Buy-to-let: is it a boom or a bubble fit to burst?

People borrowing to be landlords could face the same restrictions as homebuyers, with MPs voicing fears that property speculation may be overheating the market

Moment of truth for payday lenders: Watchdog plans to curb cost of short-term loans

The chief of the City watchdog, Martin Wheatley, spoke exclusively to The Independent's Simon Read about its attempts to control the worst excesses of unscrupulous high-cost credit companies

Consumers given power to choose a green deal

How would you like to be able to choose how your electricity is made and even where it come from? It may sound futuristic and fanciful but the independent supplier Co-operative Energy has made it a reality this week.

'Scrap the trap': calls for change grow as banks are told to play fair with loyal savers

City regulator says existing customers suffer worst rates

Motor insurers divided on proposals for whiplash ban

MPs want medical evidence for claims. Will this bring higher premiums?

British Gas repays £1m for mis-sold deals

British Gas was yesterday forced to pay back £1m to its customers after mis-selling them energy deals.

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    1st Line Support Technician / Application Support

    £20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

    Team Secretary - (Client Development/Sales Team) - Wimbledon

    £28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

    Accountant / Assistant Management Accountant

    Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

    Senior Investment Accounting Change Manager

    £600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

    Day In a Page

    Save the tiger: Tiger, tiger burning less brightly as numbers plummet

    Tiger, tiger burning less brightly

    When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
    A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

    A tale of two presidents

    George W Bush downs his paintbrush to pen father’s life story
    Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

    The day America’s love of backyard tigers led to a horrific bloodbath

    With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
    Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

    How Samuel Beckett became a French Resistance spy

    As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
    We will remember them: relatives still honour those who fought in the Great War

    We will remember them

    Relatives still honour those who fought in the Great War
    Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

    Kodak's last-ditch bid to keep celluloid alive

    Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
    Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

    Acting in video games gets a makeover

    David Crookes meets two of the genre's most popular voices
    Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

    Could smartphones soon be diagnosing diseases?

    Health Kit and Google Fit have been described as "the beginning of a health revolution"
    Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

    Can we learn to love Ryanair again?

    Four recent travellers give their verdicts on the carrier's improved customer service
    Billionaire founder of Spanx launches range of jeans that offers

    Spanx launches range of jeans

    The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
    10 best over-ear headphones

    Aural pleasure: 10 best over-ear headphones

    Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
    Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

    Commonwealth Games

    David Millar ready to serve up gold for his beloved Scotland in the end
    UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

    UCI Mountain Bike World Cup

    Downhill all the way to the top for the Atherton siblings
    Save the tiger: The animals bred for bones on China’s tiger farms

    The animals bred for bones on China’s tiger farms

    The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
    A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

    A former custard factory, a Midlands bog and a Leeds cemetery

    Introducing the top 50 hidden spots in Britain