On Budget Day, Alistair Darling achieved something rare among chancellors of the exchequer and unique among members of this Labour government. He actually made us feel sorry for him.
By common consensus, he faced — with a stoical calm that has come to be admired even by his opponents — an almost impossible job. Markets and taxpayers wanted him to unveil a strategy to set the public finances on a long-term path back towards fiscal balance without crushing fragile indications of a distant recovery. The Prime Minister clearly wanted him to regain some political ground by being seen to address the sharply rising rate of job losses, while dishing out some fiscal punishment to the rich in a way that would trip up the Tories. The last of those objectives was certainly achieved: the new 50 per cent tax rate for top earners was the only rabbit in the hat of this Budget.
Our fellow-feeling for the Chancellor before his speech began was provoked by the fact that Darling himself bears far less responsibility than the Prime Minister for the staggering level of public borrowing requirements he had to announce, hitting £175 billion this year and a peak of almost 80 per cent of GDP. And although Darling’s pre-Budget forecast last November — that the UK economy would return to growth in the third quarter of 2009 — looked fantastical even as he said it, his much-derided earlier remark that we were heading into ‘the worst crisis for 60 years’ turned out to be spot on.
But barring political miracles, Darling will leave office next year before most of the measures he announced this week have time to make a perceptible impact. Perhaps that was why he allowed himself yet another remarkably optimistic growth forecast, of 1.4 per cent next year after a 3.5 per cent contraction this year. If he’s wrong by a mile — again — it won’t matter much because his Cabinet career will be over anyway. Indeed, if the more pessimistic City forecasters are correct, he will pass into history with the recession still in full swing in mid-2010, with upwards of three million unemployed, with the gilts market refusing to absorb any more of the nation’s debt, and the men from the International Monetary Fund sitting in the Treasury waiting room. It is hard to imagine a more thankless prospect.
Our sympathies began to evaporate almost as soon as he rose to his feet at the Dispatch Box, however. This was by no means a frank admission of the scale of problem and the fiscal rigour required to address it. Rather it was yet another attempt to deflect blame and obfuscate the extent to which Gordon Brown’s profligacy has left Britain in a far worse economic state than many of our international competitors. Central to this deception was the Chancellor’s tiresome repetition of the word ‘global’, coupled with his use of the word ‘investment’ to cover all manner of out-of-control state spending.
In fairness, this Budget was never expected to contain big measures either to slash public spending or to raise significant new sums in tax revenues — until we are clearly past the low point of recessionary cycle, a severe fiscal correction might well cause a further setback. But the measures it did contain were for the most part no more than tinkering, the picture it painted was fundamentally dishonest, and on the record of past performances, we can really have no faith at all in its forecasts.
As to specifics, on the matter of public spending cuts there were none at all, only a vague reference to an additional £9 billion of ‘efficiency gains’ by 2014. But as Frank Field explained so eloquently in The Spectator last week, the country’s solvency is at stake unless there is serious plan to scale back spending soon — which is likely to mean freezing departmental spending and slashing pet projects, innumerable quangos and the grotesque paraphernalia of ‘regional government’. From the Chancellor we got not even a hint of any of that to come. Instead, we got a ragbag of spending measures. The much-vaunted car scrappage subsidy scheme will no doubt be welcomed by the German and French carmakers who supply so many of our new cars. The scheme to restart abandoned house-building projects is a total waste of money until the construction industry itself decides that its market has stabilised. And in what was heavily spun beforehand as a ‘budget for jobs’, the measures to help school leavers and recent graduates into work, and to boost the services offered by Job Centres, looked very much like retreads of similar schemes from the past which produced very mixed results.
A real boost to private-sector employment might have been achieved by far more radical reductions in tax and red tape for smaller companies and start-ups, but there were at least some useful minor tax measures to ease companies’ cash flow. As to genuine ‘investment’, perhaps the only announcement of note was a £750 million strategic fund for the hi-tech, low-carbon manufacturing sectors which are the target of Lord Mandelson’s new industrial policy. Finally, there was perhaps a little more help for pensioners than we had been led to expect.
Yet in almost every significant sense, this Budget was a darkly depressing performance, which presented shocking and historically unprecedented public borrowing figures without any real acceptance of responsibility for what has gone wrong, and with a ‘strategy’ for returning to fiscal balance many years hence only on the basis of economic forecasts that almost no one believes. The Chancellor did not rise to the occasion, and he did not deserve our sympathy.
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