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Alistair Darling's second Budget was inevitably a downbeat affair, designed to shore up the nation in the midst of what he called the “most serious global economic turmoil for over 60 years”.
Like Mr Brown since the start of this recession, the Chancellor was at pains to emphasise the international nature of the crisis. That did not lessen the harshness of today's figures — or the sense that this Budget is a hugely irresponsible missed opportunity.
The economy, which was meant to grow this year according to the Chancellor's prediction last March, actually shrank by 1.6 per cent in both the last quarter of 2008 and the first of this year. Today Mr Darling said he expected the economy to contract by 3.5 per cent this year, although, he claimed, it would start growing again “towards the end of this year”.
He predicted growth of 1.25 per cent in 2010 and 3.5 per cent in 2011 — an estimate far more optimistic than that of most independent analysts.
Meanwhile the damage done to the public finances is clear, caused by the simultaneous squeeze on revenues and by the Government's massive borrowing to pay for the bank bail-outs and the rest.
The Chancellor said that his measures will halve the Budget deficit within four years, arguing against deeper spending cuts now. Still, he confirmed that the Government will borrow £175 billion this year and £173 billion next, amounting to 12 per cent of GDP this year and 11.9 per cent next — making the UK as indebted as Italy.
As expected, Mr Darling announced efficiency cuts in Whitehall spending, although less than predicted, rising to £9 billion by 2013/14. There will also be modest new revenues from closing tax loopholes and, more controversially, a squeeze on top earners. Those earning £150,000-plus will pay a top rate of 50 per cent income tax, brought forward a year to next April, as well as losing allowances.
It will surely be nowhere near enough to rescue the public finances. It is hard to see how further cuts are now unavoidable. Some cuts seem obvious: scrapping ID cards, for instance, and freezing plans for colossally expensive government IT upgrades. And there are far more cuts that could be made: a succession of reports from the Commons Public Accounts Committee has identified enormous waste in the public sector.
Even then, further tax rises seem likely too.
This could have been the chance for the Government to rescue its reputation for fiscal competence. Instead it has dodged hard choices with this Budget, putting its faith in the return of growth before the gap in the public finances catches up with it. Ministers will hope that they can now cast the Tories as favouring damaging cuts. Looking at today's forecasts, that looks like a desperate gamble.
Costly MPs
THE PRIME Minister has recognised that the current system of MPs' pay and allowances is causing real public anger. But his proposals for reform could hardly have been introduced more clumsily. The suggestion of a daily payment of perhaps £140-plus instead of the second-home allowance, in addition to a £61,820 salary, simply for turning up, has attracted criticism. Yet it is still an improvement on the complex existing system of expenses and perks, which many MPs ruthlessly exploit. A flat-rate payment does away with all that.
But a flat payment does not have to take the form of a daily allowance. It could be an all-encompassing salary, with an extra margin for MPs from outside London. Such a measure would probably command greater support than an attendance fee. The overall remuneration of MPs, not just one element of it, should involve the Senior Salaries Review Body and take account of the analysis from the Committee on Standards in Public Life, still being prepared.
Getting the numbers right is difficult and the proposals should not have been rushed out just as MPs focus on a crucial Budget. Yet some of Mr Brown's proposals, including a ban on allowances for ministers in grace and favour homes and a more modern approach to employing staff, have merit. And in promoting reform, he is in touch with the public mood.
Reader views (1)
He missed a great opportunity to announce a fund to train MPs in competence - and I don't mean at hiding the expenses - so that they could do a job useful to the country.
- John Problem, Hackney Wick, London, UK, 22/04/2009 17:13
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