Leading article: The glaring hole in this pre-Budget report

Alistair Darling has not explained how he would cut the structural deficit

Share
Related Topics

Rarely has a pre-Budget report promised so much and delivered so little. Many were expecting – indeed hoping – for a substantial statement that would set a clear course for Britain's fiscal future. In the end the Chancellor of the Exchequer, Alistair Darling, delivered a speech shaped more by politics than economics.

Of course, the Chancellor managed to pad it out with plenty of detail. There were tax rises here and there. We were told that VAT will revert to 17.5 per cent next month. National insurance will rise by a further 0.5 per cent in 2011 on those earning more than £20,000 a year. There was a special tax designed to discourage investment banks from paying their staff exorbitant bonuses and a partial reversal on the scheduled inheritance tax break.

There were also a handful of austerity measures, notably a 1 per cent cap on public sector pay rises and pension contributions from 2011. There were even a few spending pledges and fresh tax breaks designed to help businesses. A boiler scrappage scheme will encourage people to trade in their old inefficient home heaters. There will be tax breaks for those with domestic wind turbines. And smaller companies will be allowed to defer corporation tax payments.

As one would expect, some of these moves are decent, some misconceived. But the point is that they are all small potatoes in the larger scheme of things. The Chancellor revealed yesterday that the Government is expected to borrow some £178bn by the end of this financial year, a slight increase on what he forecast in his April Budget. And the Treasury projects borrowing to remain at similarly elevated levels the year after. It has been estimated that, among these headline borrowing figures, lurks a structural deficit of up to £90bn.

Nothing that was announced yesterday comes close to filling this hole. The national insurance rise is projected to bring in £3bn a year. The public sector pension cap will save £1bn a year. These numbers are simply too small to meet the fiscal challenge that lies ahead. We remain none the wiser about precisely how the Government would meet its goal – which we are told will be enshrined in law – of cutting the deficit in half in four years.

Mr Darling is right that the timing of fiscal consolidation is crucial. If it is done too hastily it could destroy confidence and plunge the economy back into recession. The plight of Japan is, as the Chancellor said, a warning.



The need for a credible plan



But what international investors in British state debt need is a detailed and credible plan of where the Government believes the axe should fall over the coming years – even if ministers reserve the right to be flexible about the timing of the consolidation in view of the health of the wider economy. And what the country needs is a clear indication from the Government over what areas of public spending it thinks should be protected.

Yet it is increasingly clear that there will be no such plans – from either of the two main parties – until after the next general election. The Liberal Democrats, to their credit, have been more open with the electorate about their thinking on how to close the deficit. But it plainly suits both Labour and the Conservatives to go into that contest with a haze of ambiguity surrounding their spending plans.

So in the absence of significant new details on spending cuts or tax rises, what we had yesterday was a heavily political statement from Mr Darling, designed to draw dividing lines between the parties in the run-up to the next election. The central goal of this pre-Budget report was to paint Labour as the party of growth and fairness and the opposition as austere defenders of privilege.

Yet the Conservatives saw it coming. The shadow Chancellor, George Osborne, refused to rise to the Government's bait by attacking the moves on bankers' bonuses and inheritance tax. And the opposition have been subtly shifting their rhetoric in the economy in recent weeks in any case. They have eased their fixation on the size of the deficit and have finally begun to talk about the need to restore robust growth too.

The main thrust of the shadow Chancellor's attack on the pre-Budget report yesterday – alongside the familiar denigration of the Government's record of economic management – was criticism of ministers for not doing enough to support businesses. This evolution of the debate is overdue. But the fact remains that until we know what the parties' spending priorities are, this will remain a somewhat fraudulent contest.

The battle lines for the next election are evolving as the parties circle each other, probing for weakness. The pity of the situation is that it looks, at the moment, as if the British public are going to be asked to make their choice next year on the basis of a sideshow, rather than the main event.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Ashdown Group: Senior Marketing Executive- City of London, Old Street

£40000 - £43000 per annum + benefits: Ashdown Group: Senior Marketing Executiv...

Ashdown Group: Marketing Manager

£40000 - £43000 per annum + benefits: Ashdown Group: An international organisa...

Ashdown Group: Internal Recruiter -Rugby, Warwickshire

£25000 - £30000 per annum: Ashdown Group: Internal Recruiter -Rugby, Warwicksh...

Ashdown Group: Marketing Manager/Marketing Controller (Financial Services)

£70000 - £75000 per annum + benefits: Ashdown Group: Marketing Manager/Marketi...

Day In a Page

Read Next
 

Beware of the jovial buffoon who picks fights overseas

Boyd Tonkin
 

My shameful failure to live up to the spirit of Christmas

Howard Jacobson
A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all