Why no date yet for Brown's first Budget?
COMMENT; `He is a Chancellor with a taste for drama and headlines. Aides and officials are burning the midnight oil in their effort to draw up a maxi mini-Budget'
Friday 23 May 1997
With no announcement in the House of Commons yesterday, the next chance to publish a date will be when Parliament gets back from its recess a week on Monday on 2 June. That would make it very short notice if Mr Brown opts for 10 June, but the possibility must remain.
Why is there such a mystery? Officials in the Treasury - shell-shocked, if not as shell-shocked as Bank of England officials - will be telling Mr Brown he is too ambitious. After all, if he had settled on a mini mini- Budget, consisting of just the windfall tax, the schemes for unemployed under-25s and the reduction in VAT on domestic fuel, there would be no reason not to go ahead at the earliest opportunity. We could all have inked it into our diaries by now.
What is clear is that this is a Chancellor with a taste for drama and headlines. Aides and officials are burning the midnight oil in their effort to draw up a maxi mini-Budget. The trouble is that the other ideas that the Government has flagged up - from reducing the rate of tax credit on dividends all the way to ambitious welfare reform schemes such as the introduction of an earned income tax credit in place of family credit - range from very to devilishly complicated.
Trying to make sure there are no unseen pitfalls, getting legal opinions, drafting the subsequent finance bill, plugging the measures into the economic forecast to assess the effects, all take time. The civil service will be appalled at the thought of cramming this into a few weeks.
What's more, the National Audit Office has to cast its eye over the Treasury forecast beforehand. This is something it has never had to do before, and it will want to do a thorough job first time around. So perhaps not 10 June. And perhaps not a Tuesday at all. In his bid for radical, reforming measures Mr Brown may choose to follow Geoffrey Howe, who in 1980 opted for a Wednesday Budget.
Chancellor's like it or lump it approach
The save Eddie George campaign battle bus is already down the slipway and onto the main highway, to judge by some well-argued prose in yesterday's London Evening Standard putting the case for keeping the Governor on for a second term. But although the decision is still more than a year away - Mr George's contract doesn't run out until July next year - it is probably already too late for such pleading. The Bank's new masters in Downing Street will do what they will and a part of it is almost certainly to put their own man in at the Bank, probably Gavyn Davies of Goldman Sachs.
Conspiracy theorists will therefore see the present shenanigans over reform of the Bank of England as part of a deliberate attempt to destabilise and undermine the present incumbent. True or false, and does it really matter? The known facts are these. The Chancellor had intended to announce that the Bank was being stripped of its supervisory powers when he granted it operational independence two weeks ago.
However, it was then decided that the new financial services bill required to overhaul City regulation could not be squeezed into the present tight parliamentary timetable, and in any case needed greater consultation and thought before it could be drafted. The idea was dropped and the Chancellor gave the Governor the impression, both verbally and in writing, that for the time being it was on the back burner. Then, lo and behold, without warning it gets put back on the front.
What happened in those intervening two weeks to change the Chancellor's mind, and why didn't he give the Governor more warning of it? If the intention was to make Mr George resign, then it nearly succeeded. What purpose could possibly have been served by such an ill-judged endeavour is anyone's guess. Appointing a new Governor when the moment arrives a year from now is one thing, but it would have been quite disastrous for the new Government to have been faced in its first month of office with Mr George's resignation on an issue of principle.
Even so, "government sources", multiplying like rabbits at the moment, have given that impression. One was quoted in the FT as saying the Governor has "played into our hands" by cutting up rough about supervision. Others claim that the Bank basically knew all along what was going on but chose not to understand it. And so the spin goes on.
There is, however, a rather less sinister explanation for all this. In fact what seems to have happened is that the Chancellor rather belatedly realised he could make a start on City regulation in the present session merely by tacking the banking supervision provisions onto the bill already planned for Bank of England independence.
The new Government is on a roll so off the Chancellor went and just did it. Like it or lump it was the approach adopted with the Bank. As things have turned out, Gordon Brown has probably got away with it, just about. But the whole business has clearly been mishandled and he came perilously close to causing the new Government's first big hiccup - a City rebellion led by the Governor of the Bank of England no less.
Beckett dispenses with the formalities
The first puff of smoke has emerged from Beckett towers down on Victoria Street and the message for those contemplating mergers, or indeed those with mergers in the pipeline and awaiting clearance, does not look terribly encouraging.
The President of the Board of Trade has not only referred the takeover of two rail franchises by National Express to the Monopolies & Mergers Commission but she has overruled the Director General of Fair Trading in the process. Secretaries of State usually wait a few months before disregarding the advice of those paid to determine whether or not mergers act against the public interest. Mrs Beckett has dispensed with the formalities. Like so many of her Cabinet colleagues, she is a minister in a hurry.
In fairness her predecessor, Ian Lang, might have taken a harder look himself before allowing National Express to scoop up ScotRail and Central Trains had he not been in such a hurry of his own - in that case to get the rail industry safely privatised before the election.
Nevertheless, Mrs Beckett's actions would appear to set the tone for how this administration will approach mergers policy. British Airways, P&O-Stena and Bass, all of whom are waiting on Mrs Beckett to clear deals which reduce competition by creating greater consolidation, must be sitting a little less comfortably today.
Her action over National Express throws up the intriguing question of what she will do if the MMC rules that its takeover of ScotRail should be blocked. Since she has already rejected the remedy suggested by John Bridgeman at the OFT that National Express get rid of its competing bus service, Scottish CityLink, the other option would appear to be getting shot of ScotRail. Clearly competition is not the only criterion for Mrs Beckett. She has widened the public interest test and business will have to take note.
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