Last year’s Pre Budget Report was a showcase of Government spending, presented by a Chancellor hanging on to his job and a Prime Minister in an equally precarious position. The economy was shrinking and not a single economic expert could reach a consensus on what 2009 would bring. A year on, and what has changed? One thing is for sure, last year’s spending spree has come to a sudden end – the money has simply run out.
Economic Tsunami
Wearing a tie which seemed to have a design like the crest of a tidal wave, Chancellor Alistair Darling MP delivered a PBR this afternoon which had to do two things; calm Labour’s waters by providing a credible political platform for his Party at the next election, while balancing the worst set of budget figures in decades. He needs the economy to keep improving for Labour to have any hope of success in the polls, especially in their traditional areas of health and education – but the economy needs controlling before the country goes bust. It was catch 22 and Darling today used all his considerable political skill to navigate his way through.
Darling’s Solution
Facing a budget deficit of £178bn in 2009, Darling announced tax rises and spending cuts. Among these, a public sector pay freeze, a rise in NI contributions of 0.5p (but not until after the General Election), £5bn savings from the derided NHS IT programme, a much hyped bank bonus tax and confirmed the planned rise in VAT, returning to 17.5% on 1st January 2010. His backbenchers, however, will be pleased with a rise in the basic state pension of 2.5%, not least because so many are retiring next year. Darling also unveiled guarantees of a training or education place for every 16 and 17 year old to be made available to school leavers next year.
Darling again showed why he was wise not to allow the Prime Minister to fire him in the summer. His messages and reasoning were considered and clear, his delivery calm. The result was a House which did not look like it was preparing for an election – not helped by Shadow Chancellor George Osborne’s inability to land the right punches.
Reacting for the Conservatives, George Osborne MP said: ‘no one will ever believe a word they (Labour) say on the economy again’. Possibly, but his problem is whether the electorate will feel safer with him.
