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Alistair Darling's pre-Budget report will tomorrow plan to make the national economy less dependent on the City.
In a significant change of approach, the Chancellor will usher in policies designed to "rebalance" the economy in favour of trade and manufacturing.
The move follows Treasury projections that show corporation tax from financial services companies - currently just 40 per cent of the 2007 peak - are unlikely to recover to their pre-crash heights for many years, if at all.
On current trends manufactured goods will grow in importance with net trade going into a modest surplus.
The Chancellor will unveil policies to encourage manufacturers, including a scrappage scheme for central heating boilers, 60 per cent of which are made in the UK. He will also give aid to firms exporting high technology.
The policy is in contrast to the way Chancellors since the Thatcher era have relied on profits in the Square Mile to keep the balance of payments healthy, often being criticised for letting traditional manufacturers go to the wall.
Last week a report claimed Labour had presided over a sharper drop in manufacturing output than took place under Lady Thatcher in the Eighties. The big winners since 1997 have been bankers, estate agents and public sector workers, it found.
Mr Darling is also expected to kickstart the environmental technology industry which is predicted to be a fast-growing creator of jobs. He is tipped to announce tax breaks for people who invest in green technology for their homes.
The plans are in line with Lord Mandelson's strictures that the economy should be driven more by "real engineering than financial engineering".
The major PBR theme will be plans to reduce the deficit, likely to exceed the spring forecast of £175 billion this year. There is heavy speculation he will sting upper middle income earners by freezing the 40p tax threshold at £41,175.
Mr Darling is also expected to hit bankers' bonuses, but it is unclear how.
Reader views (40)
To the disgruntled in London. Suggest we let the banks fail and see how much money wind up in your pocket. Only we need to find a way to make it a controlled experiment so that the rest of us do not pay the price of you personal folly. 
- Legal Immigrant, London, 09/12/2009 13:59
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Where's all the money going to come from to pay off our huge debts, including off balance sheet and at the same time to invest in new business such as manufacturing? Any take from the city will be much reduced by a combination of new UK taxation and new EU regulation. The money making arm is the more complex investment side rather than the retail side which sold mortgages to any passer by. The investment arm must be very mobile as relatively few people and resources are involved.
Isn't the real likelihood that the UK will have great difficulty in servicing its debts as GDP will be much reduced from now on. The UK is falling down the world wealth tables and it's difficult to see what can halt this process.
- Derek Emery, Bedworth UK, 09/12/2009 09:58
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Any money the banks make has come from the population as a whole. If they make extortionate profits, its at the expense of everyone else.
The money thye make has to come from somewhere!
The idea that they somehow 'support' the economy is utter rubbish.
- Disgruntled, london, 09/12/2009 09:01
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MickinLondon and Melvyn Windbag seem to have overlooked that it was the unions that brought most of UK manufacturing to its knees with restrictive working practices and the need to go on strike every five minutes. Best of luck starting a new business with guaranteed tea breaks, a cosy 3 week closedown over Xmas, works canteen and a fag break every 15 minutes when you're competing with the Far East.
- Paul, London, 09/12/2009 02:46
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He has finally gone bonkers!
The City is the ONLY money maker the UK has left!
This lunatic government is determined to leave nothing of value behind when they finally are forced out of office!
- Richard, London, 08/12/2009 21:50
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I believe Darling and his "boss" Mr. Bean Brown will say and shout whatever but I am afraid they are out of their debt. The UK is very bankrupt and we need professional economists not some lunatic communists to continue free handouts for everything and everyone. The taxpayer cannot fund anymore!
- Steveo, London NW1, 08/12/2009 19:49
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So what are we going to make and sell better and cheaper than China and India. Perhaps Darling is going to reduce the minimum wage to 10 pence an hour.
All you banker baters be careful what you wish for.
- Paul, Kent, 08/12/2009 18:28
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Mickinlondon, london. Oh you are so misguided!
(At least Harold Wilson tried to save British car industry) "WOW" what planet are you from?
All Wilson did was to print money so British Leyland workers could take their bed onto night shift with them! What followed was the collapse of the pound and 25% inflation that cost nearly every one's job until the IMF stepped in and virtually had to run our economy.
Does it seem like history is about to repeat itself?
Go back to your Marxist brain washing classes and tell them they have lied to you and nearly all Crash-Gordons government. Long live free speach.
- Mike, London, 08/12/2009 18:27
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we could link the economy to mp's expences,top civil servents, or the bbc top flight's income, or better still
the drink and drug revenues. uk finances would then be sky high.
- Mike O'Brien, london.uk, 08/12/2009 18:15
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Darling presses RBS on bonuses. About 1,000 bankers quit on the back of what they expect to be non-competitive comp. The bankers-hating crowd cheers. RBS share price plummets. Way to manage assets majority owned by the Government on behalf of taxpayers. Let's now do it to the entire industry - it won't hurt Labour elections prospects. And if it hurts the economy - more likely than not the problem will wind up in the Tories' lap. IMHO, Mr Darling is exercising a free option. Wonder if he gets a bonus this year? :))
- Legal Immigrant, London, 08/12/2009 17:56
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Gloom & Bust Brown and mendacity Blair destroyed UK's booming Telecoms industry with their pathetic 3G licensing fiasco (where has the money gone?) followed by their annihilation of the North Sea Oil exploration and now London as a Banking and Finance centre. In between they have brought the country to its knees while pumping south of England tax-receipts north of the border. In less than 6 months time the Labour Party will feel the wrath of the UK and good riddance to all of them!
- Joe, Thornton Heath, London, England mighty England!, 08/12/2009 17:04
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Where are the revenues coming from in the future we have no industry we have no gold we have relied on the City and now hopeless Gordon and useless Meddlesome killing the golden goose! We have now virtually a communist state with no natural commodaties to back it up just like Cuba, Welcome Fidal Brown and his cronies!
- Tojo, Hythe Kent, 08/12/2009 16:56
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I've finally had enough of reading of this expression ''Hard earned money'' -There's damn all hard about sitting behind a desk and fiddling on a keyboard. -Let's in future reserve the expression 'hard earned money' for Soldiers, Miners, Trawlermen, Steeplejacks, Labourers, and the millions of people who work in factories and building sites in awful conditions and weather, and really have to 'work hard' -just to earn a bloody pittance, -while these scoundrels in cosy financial institutions stuff their pockets with impunity at great cost to others!
- Huggy, Cumbernauld Scotland, 08/12/2009 16:30
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He is proposing to kill the golden goose. The City's earnings have propped up the economy for years. If we are going to "re-balance", we need to move slowly and carefully. Manufacturing is unlikely to recover sufficiently and replace lost City revenues, if ever, in a short period, and we may need the City for some long while yet. It is very easy to destroy confidence by short term electoral gimmicks: it takes a lot longer to recover.
- James Elliott, Eastbourne, UK, 08/12/2009 16:25
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You have entered the same dreamland as Brown my Darling. Britain will crash into the ground sometime in 2011 when a loaf of bread will require a wheelbarrow load of £50 notes. The Bank of England is already reporting the amazing increase in the circulation of £50 notes. Like me, cash in your chips and get out. The last person to leave will not need to switch off the lights. There will be no juice left.
- Albert Hall, hove england, 08/12/2009 15:05
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No-one is seriously suggesting large-quantity manufacturing in Britain again - that has permanently gone to lower-cost countries.
But not all manufacturing is like that (eg. aircraft carriers: er, two please).
One of various manufacturing fields to foster is public transport - short-runs, high-tech, exportable products and skills, and world-wide demand. Investment is this produces long-term benefits to our economy as well.
- Jay, London, 08/12/2009 14:44
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Darling,Brown and all of the other (Mainly Scottish..) crypto-communist old labour gang should be put on trial for treason. They are now demonstrating their true (ever present...) class warfare credentials & are preaching the ancient military policy of rape & pillage knowing that they are going to lose the war (the election) and want to leave a barren wasteland in their wake. They can retire on their over generous "gold plated" public sector pensions and write their memoirs while they gaze admiringly at the "socially just and inclusive" nirvana they have created-a fifth rate ecomomic power, swamped by uncontrolled immigration (That's OK, the research shows that 70% of immigrants vote labour)& where all the real wealth creators have flown the nest becasue they actually like to spend their hard earned money on themeselves and their families (How selfish..) rather than have it all taken away in the interests of equality & spent by overpaid civil servants in improving the life chances of the oppressed, "vulnerable" millions who nowadays seems to encompass anyone not privately educated.
- Dalstonblogger, London, 08/12/2009 14:25
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Surely the best thing Dizzy Derling and Crash Gordon could do for the economy is go away?!
- Georgie, Islington, London, 08/12/2009 14:08
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Jd, London, UK, you are just about the only person who makes any sense on this page. What a relief to read your piece away from the stupid and pointless political point scoring and the naivety of others.
- Fanfan La Tulipe, London, 08/12/2009 13:51
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Quote: The Chancellor will unveil policies to encourage manufacturers, including a scrappage scheme for central heating boilers, 60 per cent of which are made in the UK.
More jobs for the Polish plumbers then! Another spike in immigration in 2010.
- Brian G, Norfolk Gorleston, 08/12/2009 13:44
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This is typical last kick of the dying beast politics from Labor. Destroy the City and Britain is finished. Utterly. Who will pay for the NHS? Benefits? etc, etc?
Labor has got the country into this mess by building up their "client State" .. time to boot this lot out and cut the dead wood out.
- James Macleod Ritchie, Oyster Bay Cove, 08/12/2009 13:31
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Ah a planned economy, the final step in the master plan for us to become an Eastern Bloc country. Democracy and privacy have already gone, now we can manufacture obselete machinery using government subsidies. Add a bit of collective farming and we'll be North Korea in no time! If you vote Labour then can you please promise me one thing? Last one out turn the lights off!
- Mark, London, 08/12/2009 13:25
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rebalancing the economy, means providing subsidies to manufacturers or proetctionist measures againts imports. Is the plan to kill off Capital Markets and therefore balance that way or bring up Manufacturing. If the latter, then subsidies are likely to be anti-competitive and therefore likely to cause issues. This looks like very bad economics and is based on trying to be popular and not the best interest of the UK...
- Martin_Clerkenwell, london, 08/12/2009 13:12
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How about new industries- Monarchland, where most of central London is turned into a theme park with suitably dressed serfs and lieges from the centuries-admission to tourists based on central london congestion charging.Or Mayflowerland-where large parts of Nottinghamshire reenact how they got out of the UK for the US.Chaveyland to the east...Burberry outlets etc.Finally rename the whole thing Enga-land.
Finally move the banks to Scotland -where they all started anyway...
- Amoreno, Luxembourg, 08/12/2009 12:58
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I presume he has been told now that the last twelve years of labour policies has sent the country back to a second world economy so he is taking the shape of it back to the fifties too... perfect for a few unemployed boiler makers in labour seats but in all fairness someone should mention that the india through asia to China now make things rather than supply raw materials and much more effectively and cheaply than we can possibly do in Harriets world !
- Paul ., Central London, 08/12/2009 12:57
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Don't panic everyone....we can build our economy on Tesco's.
- Mark, East Sussex, 08/12/2009 12:55
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The city is the only industry we have left and we are watching the government destroy it in front of our eyes. It is a travesty, and even more ironic is that the general populace are cheering it on.
That 1% of the population are paying a quarter of the tax. Yet the other 99% of the population is shouting at them to leave for Switzerland!!! Madness.
- Jd, London, UK, 08/12/2009 12:53
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How about an apology first? No more blaming Margaret Thatcher please - the rate of decline of the manufacturing industry in this country has accelerated under the Labour governments. At least Margaret Thatcher didn't pretend or hide what she was doing. We knew where we stood. There have been 18 years since she left power, plenty of time to have reversed it or least reduced the decline.
And do really think we can compete with the Chinese and the Indian economies?
- Mikki, London, 08/12/2009 12:50
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Shame he didn't think of this before letting so many manufacturing and engineering companies go to the wall in the last 12 years.
If ever you wanted an example of knee-jerk politics (with emphasis on the 'jerk'), this is it.
- Nobby Clark, Perth, the Scottish one, 08/12/2009 12:27
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Quote: Rs, Winchester, England. Where is all this manufacturing to come from? Harold Wilson started the destruction in the 60's and Brown has finished it. At least Thatcher attracted manufacturers such as Honda, Nissan and Toyota. Such is Labour's legacy.
Thatcher attracted no Manufacturers to the UK, Honda, Nissan, and Toyota, only came because they got the British car industry for a song, then asset stripped most of assets, remembering that those Japanese industries were only looking for a back door into the E,C market etc
Wilson did at least try to save the British Motor Cycle Industry; but at that time Big Business insisted that the motor cycle industry was dead, as people wanted more cars and not motor cycles at all etc; again the Japanese could not believe their luck, and then the Japanese took over the worlds motor cycle production etc.
Lets get this right; Thatcher sold off everything she could for tax cuts for the wealthy, including North Sea Oil etc, then destroyed the mining and industrial base of the UK, since then we import our coal from cheap state financed mining operations abroad etc, which in turn increased our imports even more etc.
Next time you pay your utility bills, check to which country you are now paying them to etc, one thing is for sure; it will not be a British outfit etc.
Brown and Blair; are, and have been, following Margaret Thatcher’s, and the Adam Smith Institute Policies since the Thatcher days.
- Mickinlondon, london, 08/12/2009 12:08
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When Labour came to power in 1997 18 years of Thatcherism had already destroyed most of Britains industrial base. With YUPPIES being the thing to be and these went on to run our banks or should that be ruin?
Funny how governments of whatever pursuasion find the road to damascus when an election is due! Or should that be demestos?
- Melvyn Windebank, Canvey Island, Essex, 08/12/2009 11:47
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and how is going to do that.
setup a few unicorn farms?
- Scotty, London, 08/12/2009 11:43
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Magic Beans! Must be surely, its Panto Season isnt it? AD and GB are ensuring that they make enough a mess of it they wont be reelected to come and clear up this awful mess, leaving iot for someone else; would be funny if it was a hung parliament
- Wallytrader, London, 08/12/2009 11:14
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Just what is darling going to base the economy on chocolate bars because its a fact him and dopey have ruined the manufacturing base in this country in favour of the banking system, thats what we are proping up or is he suffering from a bout of amnesia
- Anon, leicestershire, 08/12/2009 10:53
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Open a few coal pits while you are at it and then we can all pretend we live in the 60s.
- Frank, Home Counties, England., 08/12/2009 10:48
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What a stupid pathetic Dreamer you are Darling !
So Gordon Brown really is trying to destroy the UK from underneath its roots !
Now does the word TREASON spring to mind !
- Michael Fincham, London, 08/12/2009 10:45
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Alistair, don't worry you supine approach to the EU has ensured that the UK will not retain this area that contributes 20-25% of the economies funding, you need do nothing else.
Mind you, that means that if we carry on contributing at the rate we do and continue to need unlimited infrastructure development the economy will be so bust and so many people will be out of work that the only course for government is to print more money, but that will not matter as we are not part of the Euro economy. So we can have rampant inflation (Mugabie may be seen as a pathfinder for our approach to the economy), savings will be destroyed and the UK (or perhaps just England) will become a dustbin for Europe.
Perhaps what the Scot Gordon Brown was planning all along? I recommend a UKIP vote at the next election
- Jenny, Staines, 08/12/2009 10:24
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Where is all this manufacturing to come from? Harold Wilson started the destruction in the 60's and Brown has finished it. At least Thatcher attracted manufacturers such as Honda, Nissan and Toyota. Such is Labour's legacy.
- Rs, Winchester, England, 08/12/2009 10:13
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He can kill the City thus making it the smaller part of a smaller economy.
Simple!
- Dai, london, 08/12/2009 09:57
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Great. Manufacturing is coming back.
- Dhan Raj, Basildon, 08/12/2009 09:53
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