Tonight:
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TODAY'S pre-Budget report is the Government's boldest response yet to the recession: a gamble of billions of pounds on tax cuts to kick-start the economy.
The £20 billion package offers some welcome, if modest, relief for consumers and businesses.
The Chancellor maintained that these measures will render the recession “shallower and shorter than would have been the case”, with growth starting to return in the latter half of 2009.
But it remains far from clear whether this stimulus will indeed be enough — and what damage such a big intervention may do in the long term
to public finances.
The FTSE-100 has responded to the package with its largest-ever one-day rise, up 9.84 per cent. But the long-term effects are far less certain.
The well-trailed temporary cut of 2.5 per cent in VAT has been derided as insignificant, saving only pennies on everyday consumer goods, and will be highly disruptive for many businesses.
Likewise, the Chancellor is making permanent the rebate to lower-income taxpayers first awarded in compensation for abolition of the 10p tax rate, as well as scaling back changes to Vehicle Excise Duty, which will have only modest effects.
Meanwhile, cuts in employers' taxes are welcome but relatively minor next to their difficulties in securing credit. Whatever the effect on the economy, though, all this comes at a very heavy price — borrowing of £78 billion this financial year and £118 billion next, up from £35 billion last year. It will have to be paid for — so from where?
The Chancellor conceded that the package entails serious spending cuts after the next election — £35 billion over three years. National Insurance contributions will go up by 0.5 per cent from 2011; those earning over £40,000 will be £150 a year worse off. Further tax rises look inevitable. But the headline tax increase announced today — an increase in the top income tax rate to 45 per cent from 2011 for those earning more than £150,000 — will do very little to plug the gap. This is, rather, a political gesture designed to please Labour backbenchers and activists. Meanwhile, those lower down the earnings ladder are likely to be targeted next, as the Government tries to rescue public finances.
The challenge for the Conservatives is to make these sort of warnings about the longer term stick when most people are focused on short-term economic hardships. Shadow chancellor George Osborne's made a good stab at this in his combative response to the statement today.
He highlighted the extraordinary risks now being taken with the public finances: even the Chancellor predicts that it will take until 2015/16 to balance the budget. In the medium term, this sort of burden may end up threatening recovery rather than encouraging it — one of Mr Osborne's central charges.
But whatever the economic effects of this extraordinary gamble, at least the choice between the parties is becoming clearer. Today's report draws the battle lines for the next election. For this is both one of the most high-risk and most political Budgets in recent years: its effects are likely to be felt for a long time, during this recession and beyond.
And celebrating...
LONDON theatre. Today the winners of the 54th Evening Standard London Theatre Awards are announced. But whoever triumphs, the biggest winners are London's theatre-goers. For the strength of this year's entrants shows the extraordinarily dynamic state of London theatre: our critic Nicholas de Jongh says that in 17 years of judging, he has never seen a more exciting line-up.
The city has theatres striving to use their space innovatively; talented directors such as Michael Boyd and Michael Grandage; and brilliant actors and actresses including Kenneth Branagh, Chiwetel Ejiofor, Penelope Wilton and Lesley Sharp - all shortlisted for awards. Whatever the result, London is a city where theatre goes from strength to strength.
