Outlook: Why the Chancellor's options are so limited - Business - News - The Independent

Outlook: Why the Chancellor's options are so limited

What does the Institute for Fiscal Studies' always excellent Green Budget tell us about the Chancellor's options when he stands up to give the real thing on 17 March? It must already be clear to Gordon Brown that whatever he does, it is not going to be popular.

The big judgement first; how much to spend and borrow? One in every 50 people in the country is on a waiting list for hospital treatment, and meeting expectations for a better-funded NHS is among the Government's top political priorities. Education, too, is crying out for more expenditure.

Yet the Chancellor has tied himself to Ken Clarke's spending plans for another year and staked his reputation on perpetual prudence. The Conservatives doubled the national debt in five years and left interest payments one of the biggest categories of government spending. There's still a huge task to perform in clearing up the mess. Nor should it be forgotten that after his July Budget Mr Brown was roundly criticised by many commentators for not being tough enough. They blamed him for leaving the hard work of slowing and rebalancing the economy to the Bank of England, piling on more pain from higher interest rates and a strong pound.

These conflicting pressures mean that the Chancellor will almost certainly leave the big picture unchanged. It is in the detail that we can expect the fireworks. Harsher treatment of company cars is pretty much a certainty; mortgage tax relief might be further reduced or abolished. And there appears little the Government can do to correct the well chronicled problems of its Individual Savings Account initiative. The Chancellor must also make a start on welfare reform, a potentially lethal minefield just waiting to be wandered through.

We already know Mr Brown plans a 10p starting rate of income tax when prudent, reform of National Insurance to bring it more in line with income tax, and a Working Families Tax Credit. All have their vociferous critics. Will the Chancellor go even further in March and indicate his thinking on pensions, on child benefit, on disability allowance, on saving for long-term care and on "affluence" tests?

It is in the detail, rather than the broad outlines of the spending review, that the potential for injury lies. Too much haste and he's certain to fall victim to the mines, too little and his party will begin to wonder why he was elected.

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