Gordon Brown can afford to give a confident Budget. But it's what happens next that matters

Share

It was hardly surprising that the Chancellor of the Exchequer, Gordon Brown, should use his speech to Labour's Scottish Party Conference yesterday to spin next week's Budget. Predictably enough, Mr Brown informed his audience that "the Budget will lock in our commitment to monetary vigilance and fiscal discipline". There will, Mr Brown seemed to be saying, no pre-election giveaways and, what's more, there will be no nasty tax increases after the election. No, no need for any of that; as Mr Brown put it: "We will meet all our fiscal rules in a prudent and long-term way, and we will take no risks with stability now, in the next parliament or at any time."

It was hardly surprising that the Chancellor of the Exchequer, Gordon Brown, should use his speech to Labour's Scottish Party Conference yesterday to spin next week's Budget. Predictably enough, Mr Brown informed his audience that "the Budget will lock in our commitment to monetary vigilance and fiscal discipline". There will, Mr Brown seemed to be saying, no pre-election giveaways and, what's more, there will be no nasty tax increases after the election. No, no need for any of that; as Mr Brown put it: "We will meet all our fiscal rules in a prudent and long-term way, and we will take no risks with stability now, in the next parliament or at any time."

All familiar Brownian rhetoric, all delivered with that peculiar forcefulness that has become his trademark. And, to be fair to the Chancellor, he has consistently defied his critics and faced down his detractors when it comes to economic forecasts. Time and again, political opponents and independent economists have warned of a "recession made in Downing Street" or of some other catastrophe just around the corner; yet, in Budget after Budget Mr Brown has been able to announce that, once again, he has managed to meet the targets he set himself and that the Treasury was right and the rest of the world wrong.

The economy has been resilient and growth robust; Mr Brown's fiscal rules have been met, if only just. In his speech to the Scottish conference on Friday, the Prime Minister was happy to call him "the best chancellor this country has had for 100 years". That's up on January, when Mr Blair called him "the most successful British post-war chancellor". Soon, maybe, it will the best chancellor since the office was founded under Henry III in the 13th century. Are Mr Blair and Mr Brown getting on better these days?

Still, as investors know, past performance is no necessary guide to the future. In the short term, there isn't much reason to doubt Mr Brown's word. But Mr Brown is a politician to his fingertips, and it would be strange if he wasn't clever enough to find one or two sweeteners for swing voters. He would be well advised to engineer some "symbolic" moves, perhaps taking some middle-class voters out of the higher-rate bracket, maybe reducing stamp duty for modest homes, so helping first time buyers, and, possibly, helping pensioners having difficulties paying the council tax. All headline-grabbing stuff, and small enough sums to make no real difference to the overall budget deficit. Such policies would certainly wrongfoot the Tories, who have been making some headway in this territory. However, Mr Brown's next Budget probably won't be a huge bonanza for anyone.

What voters should really be focusing on is what happens after the election, and in particular two questions. Will interest rates rise? Will Mr Brown, or whoever is the chancellor, have to raise taxes?

On the first point, the signs are that opinion in the Monetary Policy Committee of the Bank of England is, indeed, edging towards raising rates, and may move possibly as early as this Thursday, although they may well be reluctant to do anything that might be construed as interfering in politics until after the election. A quarter point rise on the Monday after polling day could thus be on the cards, too late to make any difference at the polls, but still bad news for growth and the chances of Mr Brown keeping public finances on track.

That may be more difficult than Mr Brown makes it look. A budget deficit of 3 per cent of GDP at this stage in the cycle - when the economy is growing at a respectable rate - is higher than it should be. Mr Brown has made it clear that "investment" in the public services, ie spending on schools and hospitals, comes first. So with little room left to raise stealth taxes and the old pledges on income tax renewed once again, it seems likely that Mr Brown will have to turn once more to national insurance to make his sums add up. He will be asked about this many times in the next few weeks. Listen to what Mr Brown says, and how he says it, very carefully indeed.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Recruitment Genius: 3rd Line Virtualisation, Windows & Server Engineer

£40000 - £47000 per annum: Recruitment Genius: A 3rd Line Virtualisation / Sto...

Recruitment Genius: Refrigeration and Air Conditioning Service Engineer

£26000 - £35000 per annum: Recruitment Genius: A successful national service f...

Recruitment Genius: Business Development Executive / Sales - OTE £25,000

£15000 - £25000 per annum: Recruitment Genius: This is an opportunity to join ...

Recruitment Genius: Sales Administrator - Fixed Term Contract

£17500 - £20000 per annum: Recruitment Genius: We currently require an experie...

Day In a Page

Read Next
Andy Coulson  

Andy Coulson: With former News of the World editor cleared of perjury charges, what will he do next?

James Cusick James Cusick
Jack Warner  

Fifa corruption: Strip Qatar of the World Cup? Not likely

Tom Peck
Syria civil war: Meet the military commander who says his soldiers will not rest until every inch of their war torn country is free of Islamist 'terrorists'

‘We won’t stop until Syria is back to normal’

Near the front lines with Islamist-controlled towns where Assad’s troops were besieged just last month, Robert Fisk meets a commander confidently preparing his soldiers for battle
The inside story of how Bill Clinton built a $2bn global foundation may undermine Hillary's chances

The inside story of how Bill Clinton built a $2bn global foundation...

... and how it may undermine Hillary's chances in 2016
12 best olive oils

Extra-virgin, cold-press, early-harvest, ultra-premium: 12 best olive oils

Choosing an olive oil is a surprising minefield. Save yourself the hassle with our handy guide
Rafa Benitez Real Madrid unveiling: New manager full of emotion at Bernabeu homecoming

Benitez full of emotion at Bernabeu homecoming

There were tears in the former Liverpool manager’s eyes as he was unveiled as Real Madrid coach. But the Spaniard knows he must make tough decisions if he is to succeed
Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?