A little heavy-handed, a little obvious, perhaps, but the Prime Minister's call for a Commons vote next week on the vexed question of MPs' expenses was a canny curtain-raiser for today's Budget. It's as well to put your own house in order before trying to line up the voting public behind austerity measures that are bound to inflict pain on the country at large.
If, by July when the details of all MPs' expenses are released, sweeping reform is already on the statute book, the public outcry will be less damaging to the Government than it might have been. MPs, of all parties, with small majorities will still be at risk if voters judge them to have played fast and loose with taxpayers' money, but at least a measure of confidence in Parliament will be restored. Or it will be if the Prime Minister can make the reform happen.
Making things happen will also be crucial to the success, or not, of today's Budget. The illusion of sound management that Gordon Brown liked to create in his years as Chancellor is not an option for Alistair Darling today. He has to be concrete in his proposals, realistic and persuasive. This is not only because of the depressed and embittered mood that pervades the country, and the widespread scepticism of politicians, it is because this is essentially an election budget. It is the last chance the Government has before the election to set objectives and meet them.
Measures designed for three, four, even five years hence will doubtless feature in Mr Darling's speech; the Government must convince financiers and international markets that it has at least a medium-term strategy. It needs to demonstrate that it is, and will remain, credit-worthy. But the Chancellor also has to offer something for the here and now. Over one year, the British public has been plunged from confidence that its economy was a world-beater into a state of acute anxiety, where the old plagues of indebtedness and unemployment are back, and demon inflation seems to lurk just around the corner.
Yes, this is a crisis that grips the whole Western world – and whose reverberations have rocked many more countries besides. But it is also one in which Britain looks less well-equipped than we were led to believe to ride out the storm unscathed. Even if the tiny hints of revival turn out to be real, it would be highly premature to bank on them. At an estimated 11 per cent of GDP, and projected to grow further, the gap in the public finances threatens our financial health into the next generation.
Mr Darling's task is at once complicated and simplified by the emergency action already taken. Interest rates have been reduced as far as they can go; banks have been bailed out; loans guaranteed; the pound devalued, and money has started to be pumped into the economy. The tax rises for high-earners, announced in the Pre-Budget Report last November, are not due to take effect until next year, and their efficacy has anyway been questioned. The Chancellor's further options look restricted in the extreme.
The customary Budget leaks have focused on housing, public sector savings and credit guarantees for business. Of all ideas floated, that of a new bank to assist innovation and start-ups is the most imaginative, and the one that sends the most positive message about the future.
The measures mooted to boost housing owe much to the Liberal Democrats' proposals for buying up unsold or incomplete housing and boosting the social sector – but they are none the worse for that. With unemployment inexorably rising, social housing in many places in desperately short supply, and construction almost at a standstill for want of credit, help for this sector looks like a sensible investment. If handled innovatively, both projects could also help advance the green agenda.
Big savings from the public sector will be essential; but we doubt whether the "efficiency" savings proposed will suffice. Efficiency often means that front-line services suffer to save questionable layers of management. With so many services now delegated in some way, the time is surely ripe for a review of exactly what central government does. We suspect that the NHS, in particular, which has received so much public money, could use it far more effectively.
This may not be the time to address the disparity between public and private sector pensions, and the downside to removing higher-rate tax relief on pension contributions is that the gap would widen further. A more productive approach might be to offer some encouragement to savers, many of them pensioners, who have been disproportionately penalised for prudence.
Mr Darling has his work cut out. But with his options so limited and the public mood so gloomy, this could be, as Barack Obama's chief of staff memorably put it, a crisis too good to waste. With the election believed, in many quarters, to be already lost, perhaps he could surprise us – pleasantly – with some radicalism and some hope.Reuse content