Steve Richards: Darling has staked everything on a recovery this winter
The measures were leaked, the figures bad and the Chancellor no orator – yet the result was curiously gripping
Alistair Darling yesterday delivered a Budget that was ghoulishly compelling for a single reason. Could a Chancellor in an economic straitjacket and with a general election coming into view make any moves to help him, his long-serving Government and the rest of us break free?
We knew in advance that the public-sector borrowing figures would be dreadful. Most of the proposals were no surprise because they had been leaked. Ministerial energy had been focused less on preparations for the Budget than usual because of the intense build up to G20 summit in London earlier this month. The Chancellor himself is no orator, delivering bad and good news in the same understated manner. And yet the event was curiously gripping.
It was the conjunction that was so extraordinary. This was a pre-election Budget. Darling might deliver one more next spring but then the election will be weeks away. This is the Budget that sets the course for the Government. At the same time, Darling was doomed to deliver relentlessly bad economic news.
In terms of whether Darling could make any moves to lift the economic gloom in the short term, the answer was clear before he had sat down and, in truth, before he stood up. He could not do so. Already public spending faced a tight squeeze. Now the squeeze will be tighter still and for many years to come. The cuts will unavoidably extend well beyond savings on "bureaucracy".
Taxes will also rise, but this time there will be no benevolent link between a tax increase and more investment in the National Health Service as there was when Gordon Brown announced popular rises in National Insurance contributions in 2003. Instead tax rises will be accompanied by spending cuts.
The constraints on Darling were almost comically intimidating, an economy facing frightening levels of debt, the markets watching like hawks to judge whether a route towards more balanced budgets was credible, the wider electorate wondering about the impact on their lives, the users of creaking public services fearing that they will creak more in the years to come.
Partly because he needed to convince the markets that he had a credible path to what he somewhat vaguely described as "more balanced budgets", the tax rises were precise and, in the details published later, so were the cuts on the overall public spending limits, although not how individual departmental budgets will be effected.
Darling broke up the gloom with new measures, some of them significant and worthwhile. Like a prisoner being allowed out on day release, he preceded each positive announcement of more cash for certain groups and causes with the words "I am going to give more to help... pensioners on low incomes/ the unemployed/poorer pensioners/small businesses/green initiatives".
Fleetingly during these sections of his speech, he gave the impression of a figure with spare cash to spend but, of course, the broader context was already established. Here was a Chancellor offering a little help while having to find ways of paying back billions. He was firmly in his straitjacket.
But in terms of the political challenge, Darling wriggled a little. He took some of the attention away from the bleak economic figures by delivering the most overtly left-of-centre Budget since Labour came to power in 1997. Gordon Brown was capable of stealthy redistribution when he was Chancellor, while miraculously generating headlines that suggested no one had lost out from his measures. In contrast Darling's announcements on tax were not hidden, but in his understated way he shouted them from the rooftops.
The tax increases on those earning more than £100,000 are substantial and some of them will be implemented a year earlier than planned. Meanwhile, those on low incomes, poorer pensioners and families in particular will be better off at least during the recession. Darling and Brown hope to play the fairness card in the run-up to the next election.
When Darling announced in his pre-Budget report last December a 45p rate of tax for those earning more than £150,000, he generated several headlines about the "death of New Labour". Brown was so alarmed at the time that he contacted several newspaper editors to assure them this was not the case. No doubt there will be many more such headlines now: a re-burial if that is possible. Brown will be on the phone again.
On one level, the funereal metaphor is obviously correct. The pledge not to change the rates of income tax, which was made with such a flourish in the build up to the 1997 election, became totemic, although even then Brown had been keener for a new top rate of tax for high earners than Tony Blair. But there is still a distinct new Labour dimension to the announcement. Its pioneers never acted without checking the opinion polls and the focus groups first, before proclaiming that they were boldly implementing policies. All the recent surveys suggest that a 50 per cent rate on high earners would be popular.
This is not surprising, given that the economic situation is transformed from the mid-1990s when New Labour made its cautious pledges. There is now a populist line on tax that was not available then, that it is fairer for those who are earning more in the recession to pay their share.
Nonetheless, the turnaround in prime ministerial strategic calculations is breathtaking. In his final Budget as Chancellor in 2007, Brown announced a tax cut which, I suspect, he hoped would be a springboard to an election in the spring of 2008. Now he contemplates an election in which a tax rise would have been implemented, with more to come afterwards.
The Conservatives have responded cautiously and a little evasively. Their slightly convoluted position is that, while they are theoretically opposed to increases in marginal rates of tax, they will not regard the scrapping of the increase as a priority. Darling and Brown calculate that such a position will not go down well with Tory activists addicted to tax cuts rather than increases. Probably the Tory leadership will be able to say and do whatever they choose if the Conservatives are well ahead in the polls. If the gap diminishes, the Government's political calculations may well be vindicated. The Tories have had issues with "tax and spend" since 1997 which are far from resolved.
Indeed, one of the questions that arise from the Budget is for the Conservatives to answer. David Cameron was in sparkling form as he tore into the Budget in the Commons yesterday. It is often said that responding to the Budget speech is one of the most politically challenging tasks for a Leader of the Opposition who has no advance notice. As we all had so much advance notice this time, the job was fairly easy, but Cameron made the most of the opportunity to highlight the bleak economic situation and blame the Government for it.
But what he did not specify then, or elsewhere, is what he would do to remedy the situation more speedily and fairly. Calling for more spending cuts is easier than detailing what form they will take. The Conservatives have made this "Labour's debt crisis", but if Britain faces unique problems we await to hear their distinct solutions.
Probably the scale of the economic crisis will overwhelm expedient political calculations, not least when a government seeks to serve for a fourth term. The only hope for Labour MPs relates not to any of the policies outlined yesterday, but in one of Darling's forecasts. He predicted that the economy would start to recover by the end of this year. If that were to happen, the Government would cling to the "green shoots" and claim credit for their cultivation.
But in December, Darling forecast that the recovery would start this summer – one of many forecasts that have been revised in an even gloomier direction. If the Chancellor proves to be optimistic once more about the chances for growth, he will have no wriggle room, politically or economically, between now and the election.
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Comments
Try reading the pieces by your colleagues Warner and McRae, then consider how awful your nonsense in by comparison.
Jobless hits 2.1m as public debt soars to £90bn. A real HUGE hole.
Alistair Darling gambles to save economy
He insisted public finances would get back on track with a halving of borrowing within four years as the economy began to recover from the end of the year.
Chancellor has gambled on a rapid economic recovery to rebuild Britain's battered finances as he revealed this year's borrowing would hit a record £175 billion.
Well the way I see this is two folded
He is gambling with our money. He promised the turnaround would have been end of the 2009 or the 200. The promise now taken a new twist to four years. Therefore, the payback is in 2013 or 2014. Where is the turning of the economy in 2009 or 2010?
A politician is a politician, no matter whet colour you give him or no matter what name you give him. He is to raise the Taxes for, at times, reason we do not know but makes sure we cough up.
What we read after the budget, rather the next day, is as important as yesterday, as we now can feel the heat. IMF, the brain, the bones, and the body of the finance say this. Where are we, we have to wonder now. The savage slump in the world's leading economies is set to be even deeper than previously feared, with recovery unlikely to materialise next year. Therefore, it is 2012 or 2013. Not early.
I thank you
Firozali A. Mulla
This recession will last many years and the consequential debt our children have been unfairly saddled with will take the best part of 40 years to repay. Why should they be so disadvantaged by this Government? This is grossly unfair and will be a battle line for the next election.
The electorate will understand when the Tories have to raise taxes because Labour have left them no alternative. This dysfunctional Government has virtually bankrupt the economy. The electorate are fed up watching a greedy, sleazy, dysfunctional Government recklessly spend their money. They have run out of other people's money.
Yesterday's budget was an obituary for Labour and no amount of gloss can save them from imploding.
The Germans are predicting a 5% fall in their output this year with no recovery in sight (see the FT)...so Britain is going to do better than them eh... Darling & Co.? Yer. wanna. bet?
Alan, you are talking to a devout labour follower. Mr Richards gets many commets like yours EVERY time he writes a column. NOTHING changes his view, he is beyond redemption. Why he writes for a paper called the INDEPENDENT is a mystery. He is anything but independent.
What is more worrying is that they will have one more Budget to do further untold harm. No, Labour is incompetent, spiteful and vindictive and we must get rid of them at the next Election.
How do tax rises encourage enterprise?
How does massive market manipulation by the state allow for efficient industry to grow and develop?
How does weak economic and financial commentary by the poodle press enliven debate and understanding?
There will become a time when working and earning will be a pointless exercise so you may as well move or let the state look after you. After yesterdays budget we are one day closer to the day the UK stood still..
So now we have a leader without a mandate progressively breaking every commitment made to the electorate and without any honour.His rule will be remembered along with other Labour failures to grasp that taxation is our money .Brown is as bankrupt as the bankers he spawned.
J.M.Keynes, though discredited in the monetarist era, understood perfectly the need for increased employment to stimulate demand, funded by monetary expansion. But he did it by printing money, not adding to an already huge debt mountain. There is a difference.
I still doubt whether the expected incoming vonservative gvernment appreciate either of these facts well enough to take them seriously, to adopt them as a political position and argue the case for them. But if they don't, what hope is there?
Tony, Bristol.
People losing jobs, savings, even their homes, won't forgive Laour for this for a long time. Labour allowed them to believe the gravy train would last for ever. How come the self-styled genius at No.11 didn't notice the Banks were gambling like lunatics and heading for meltdown? A number of financial commentators did notice. Why didn't Brown listen to them or was he too busy "doing things" to listen to others?
Come on Steve, show some resolve. Vote LibDem since I imagine you won't ever vote Tory.
We have had thirty years of specious market economics - tamely picked up and carried on incompetently by New Labour since 1997.
David Cameron may huff and puff and make jokey party points, but a large part of the country still realise the fundamental truth, which is why, even facing an open goal, they struggle to get above 40% support.
The Lib Dems really should be making more of this as the only mainstream party that not only can't conceivably be blamed (easy when you haven't been in power for decades), but as one that, almost uniquely, has "called" most elements of the present crisis correctly and offered imaginative solutions.
If the Lib Dems loose ground as the polls currently show, then it will be a tragically missed opportunity, for the country as much as the party.
So who is getting all the interest payments?
It's like a giant worldwide tax, but taxation without representation. A few people will get even richer, they'll see the politicians alright, throw them the odd scrap, and they'll continue to own the media, so the lies will continue until they really cause problems.
I wonder how long this empire built on lies will last, the only conselation is that the people who've built it are going to die and go to hell sooner or later. Surely as stupid as the priveleged rich are, they must realise that they aren't going to live forever, and when they die, they've got nowhere to go, and probably as many people to mourn them as mourned William the Conqueror.
There is no way the Conservatives can win by promising a return to the 1980's although they may get the most seats - remember Ken Livingston still got 36% of the votes against a popular fun figure in a jokey election.
If the budget is so realistic then let it be a plank in an election manifesto. Let the public
judge through an election; but hanging on in hope is simply doing UK Ltd more damage.
What are you going to do for non stories when the butt you kiss gets fucked off next year.
bye bye Steve