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Alistair Darling's priority to convince City he will cut debt
Joe Murphy, Political Editor3 Dec 2009
Alistair Darling has rebuffed pressure for a spending review ahead of the election and is instead giving priority to convincing the markets he has a credible plan to slash debt, the Evening Standard has learned.
With a week to go before his third pre-Budget report, the Chancellor is making clear there is no room for an autumn giveaway although he is confident that growth will be under way in the New Year.
He is effectively ruling out a comprehensive spending review until long after the election, probably not until autumn next year.
In response to a surprise bid from Children's Secretary Ed Balls for inflation-busting spending rises for schools, a Treasury source said: "It cannot be done on the back of an envelope. It has to be done properly and that takes a minimum of nine months."
Mr Darling's mood is described by colleagues as "cautious but confident" that his spring economic forecasts will be broadly vindicated, including for growth at around 1.2 per cent next year. However, he will warn of uncertainties, such as the crisis in Dubai, that could throw recovery off track.
Treasury insiders believe the deficit will stay close to the forecast of £175billion, despite City claims it might surge more than £200billion.
The dominant theme of the PBR will be an attempt to prove that the Government is serious about halving the deficit as a percentage of GDP over four years. Legislation to make the target binding will be published.
Mr Darling is insisting that Cabinet ministers look for efficiency savings. He will unleash a political attack on the Tories, saying that their plans to cut spending further and faster would risk a "double dip" recession.
Major investments, such as London's £16billion Crossrail project, are vital to supporting jobs and growth, he will argue.
He will reject pleas from industry to postpone or phase the increase of VAT from 15 per cent back to its pre-slump level of 17.5 per cent, believing it has done its job as an emergency stimulus. The Treasury thinks the stimulus effect of the Bank's quantitative easing programme will last for another year.
Reader views (5)
This is going to be an election budget, no matter what anyone else wants the govt to do.
Brown is already making class an issue, so there will obviously be a tax on the rich plus something like standardising the rate of vat, which will bring in billions. The effects of such a move, on the low paid especially, will not be felt until after the general election. Therefore at the time of the actual budget next year, voters will be lulled into a false sense of security that they have got away with not having to pay for the govt`s mountain of debt. Standardised vat rate will have a greater effect on the individual than an increase in direct taxation; but the incoming government will get the blame for that. Such a cynical move may however lose labour fewer seats in the marginals.
- Brian G, Norfolk Gorleston, 04/12/2009 09:49
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Any idiot can spend money that is not theirs.
Ask your local MP - they are experts.
- Reuben Camara, Plot 1, Morecambe Compound, EUSSR, 04/12/2009 03:12
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'...uncertainties, such as the crisis in Dubai, that could throw recovery off track.'
Interesting that Dubai had the foresight to ring-fence its risk, while we now seem to have an open-ended commitment to underwrite whatever folly the banks let us in for. The nation hasn't taken over the banks: it's the other way round.
- Mdj E10, london uk, 03/12/2009 23:39
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How on earth could anybody believe anything this shower say? Especially when it comes to spending. True to form this bunch of socialists have spent with abandon without any thought as to where that money comes from.
- Mark, London, 03/12/2009 20:10
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How will he cut debt when he is surrounded by an arrogant Prime Minister and other Ministers (eg bully Ed Balls) all wanting to spend like crazy?
- Tojo, Hythe Kent, 03/12/2009 10:49
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