Darling, flanked by two identically balding accountants, was on peerlessly dull form. His bushy slugs rarely raised their heads above his wire-framed specs as he steadfastly refused to give MPs anything resembling a straight answer.
Today the Chancellor, Alastair Darling, delivered what was billed as one of the most important Budget speeches in decades. Backgrounded against rising unemployment and the prospect of deflation this was, in many ways, not an usual context for the unveiling of annual public spending. But with part and fully nationalised banks, unprecedented levels of public debt and a spiraling pension deficit the 2009 Budget was largely plucked from unknown territory. Here’s what the media made of it:
Alastair Darling says the UK economy will begin to grow again in 2010. Oh no it wont says the IMF and the Times’ Gary Duncan:
The IMF dealt a severe double blow to the Chancellor’s new forecasts barely an hour after they were unveiled.
The Guardian’s Larry Elliott says Darling’s optimism – even with record public debt projection – is misplaced:
He still believes that the combination of cheap money, lower inflation, a weaker pound and fiscal easing will deliver a V-shaped recovery, but has now put back the timing of the bounce until the end of 2009. This does represent a colossal stimulus and it may start to work sooner than the pessimists think.
Edmund Conway, writing in the Telegraph reckons that no investor worth his salt would touch Britain with a bargepole after today, as markets testified:
As soon as Alistair Darling sat down and the Treasury released the full details of its borrowing plans, the screens started to bleed red.
In the Mail, Quentin Letts satirises Darling’s biological inability to deliver any speech with more zazz than a bag of plain rice:
We sketchwriters used to think Gordon Brown the all-comers’ champion Budget bore but this fella makes Broon look like Ken Dodd.
The Standard’s Anthony Hilton feels a sharp, jarring pain along with 350,000 people whenever they reach for their wallet:
Making the rich pay up may be popular but there are not enough of them to raise the billions he needs.
The Times’ Danny Finkelstein, writing on Comment Central, is sure that Darling has handed a massive shiny present to the Tories:
In other words, until now the Tories could not oppose the 45p increase unless they were actually willing not to do it and fill the hole with some other measure in a campaign. Now they can distinguish between opposing it and giving an instant promise of repeal.
The FT’s Martin Wolf does not like the look of Darling’s books one little bit:
This is a horror story. But it could, of course, be worse: the economy may not recover as hoped; losses on support for the banks could, as the International Monetary Fund suggests, be far bigger than the 3.5 per cent of GDP now expected; and, above all, the creditworthiness of the British government could come into question, with devastating consequences.
Mark Deen, for Bloomberg, was bad news for drivers. And smokers. And drinkers. And rich people obviously:
Chancellor of the Exchequer Alistair Darling raised taxes on British motorists, smokers and the rich to contain an unprecedented budget deficit as he forecast the worst recession since World War II.
At the BBC, you know who focuses on something sensible like tax relief for businesses on capital spending:
Actually, it’s the increase to 40% in tax relief to businesses on capital spending, for one year only – which is forecast to cost £1.64bn.
Sky says that small businesses’ response to the Budget is the professional equivalent of sticking your ears out and blowing a huge raspberry:
As for the higher tax bracket increase, they shouldn’t have done this now, as now is the time in encourage entrepreneurs, not discredit them.
And finally, Tony Bonsignore at City Wire, makes the under-reported point that this 50 per cent tax malarkey carries a whiff of political posturing:
If there was ever a time for a shift to the left, for a political throw of the dice, then this was it.
The chancellor Alistair Darling today said that the stricken building society would have needed between £60m and £100m to stay afloat. So why, we should be compelled to ask, didn’t we allow it to have it?
Access to the much trumpeted liquidity scheme, says Darling, wouldn’t have been enough to ensure its depositors’ money was safe.
In the first of what could be many PBR u-turns, Alistair darling has been forced to renege on a pledge to increase alcohol duty. Proposed rises in duty have been halved to 4 percent. He got his sums wrong, honest mistake?
Well, no. Duty rises are permanent, VAT reductions are only set to last for the next 13 months. This covert tax rise had not gone down well with Scotch Whiskey producers, claiming that an extra 29p a bottle would have been added in order to cover duty rises. And that would mean Scottish people couldn’t afford to get drunk.
Darling, ever the Scottish sympathiser, has acted swiftly, and this should be applauded. But his covert tax hike in fuel and alcohol duty should not.
The spin coming from Labour is that this budget is designed to help the worse off and tax the super rich. Aside from the fact that if you tax the rich people of the City, they will leave, this budget will affect people on middle incomes a lot more than the Government is letting on. National insurance increases will see to this.
Labour’s pledge to help poor people seems to be based on their ability to create a lot more of them.
On Monday, the Government predicted the percentage of national debt will reach 57% by 2013 and that the country would be back to ‘borrowing to invest’ by the beginning of 2016.
The obvious question is how on earth can they know that? Darling has been wrong before, forecasting a wildly optimistic national growth in his last budget. And compared to these days of wildly fluctuating markets, the last budget was a put-your-house-on dead cert to predict.
Yet he still was wrong. Now, at the same time as Bank of England suddenly decided that 5% interest was acceptable in a faltering economy one day and then 3% was better the next, how can Darling hope to predict anything accurately? It simply cannot be anything other than wild speculation or blind hope.
Mervin King’s favourite book in times of need is by a man called J. K. Galbraith, a sort of Nostradamus on Lithium. In Crash of 1929, Galbraith says:
There are two kinds of economist, those who don’t know what will happen and those who don’t know they don’t know.
Now Mr. Darling is no economist. But he could at least have the courtesy to admit that he knows more about Margaret Beckett’s underwear draw than he does about the economy.
Tomorrow Alistair Darling will announce his pre-budget report – hailed by many as the most important in a generation. It will certainly be the most significant of his career.
It’s not the best kept secret that Mr. Darling will move to temporarily cut VAT to 15% as part of the Government’s £25bn tax relief plan. We can expect radical action from Labour and all-round head shaking from the newly-nasty Tories.
Apart from that, the content of the announcement is pretty much any one’s guess. Here’s what won’t happen:
Alistair Darling and Gordon Brown read out a joint statement sincerely apologising for the way they have destroyed the economy. “We got us into this mess with an unsustainable culture of easy debt and endless borrowing. But, trust us, more of the same is just what we need to fix it.” To reiterate his sincerity, Brown attaches a lie-detector machine to his temples, which immediately explodes.
After stunned silence reverberates through the chamber, David Cameron leads the clapping which slowly turns into rapturous, adoring applause.
Mr. Darling holds up his red briefcase for the cameras which falls open, exposing its contents as no more than an apple core and a Mr. Men book.
Cameron and Brown agree to ‘forget our differences’ before embracing in compassionate man hug, sobbing.
Mr. Darling criticises the EU directive keeping VAT at a minimum of 15%, calling EU commissioners “garlic-munching spoil sports”.
Nick Clegg puts forward an authoritative and exhaustively researched financial rescue plan that will allow Britain to avoid recession and reduce taxes whilst increasing public spending and employment levels. The plan is universally acclaimed.
George Osbourne sings the MPs out with a rendition of Chas and Dave’s “Ain’t No Pleasing You”.
Cameron is now on more traditionally Conservative ground, in spite of a new found aversion to tax cutting. Unsurprisingly, this has received widespread support among Tories. But is there anything in it? How can all nations of the world (apparently) support uniform tax cuts and Her Majesty’s Opposition not?
The arguement that short-term tax cuts, coupled with increased public spending will eventually lead to equal tax rises – possibly when Mr Osbourne has wrestled the keys to the treasury from Mr Darling’s cold, tenacious fingers – is a sound one. Sort of.
A tax cut of, say £20bn now will not necessary lead to an increased treasury debt of £20bn. With more money in their pockets, people will spend more and potentially generate more jobs. Jobs mean tax so the Government could potentially end up more people paying tax (albeit a little less). Just the shot in the arm the economy needs.
If this is the case – and Labour are clearly hoping it is – then why haven’t this Government been one of low taxes since the start?
It’s amazing to see the two main parties posturing for position, and how they’ve changed tunes with the times.
Cameron knows his ‘it’s going to hurt, but eventually you’ll thank us’ will prove unpopular compared to internationalista Santa Brown. He’s banking on the next general election being in 2009 and, given how desperate Brown has been to get into Blair’s slippers, it’s unlikely to be any sooner.
By then the public may come round to Dave’s hastily scribbled way of thinking. Of course, if superGord saves the world, the Tories could end up ruing such vacillating.
Brown is seen “by voters as best able to handle the recession.” Presumably they have been taken in by Brown’s self-casting as a new FDR, as a saviour of the global economy. He is not.
Labour’s proposals of tax cuts are likely to be followed by other political parties. They are a good idea; giving people back some of their hard-earned cash might encourage them to spend more or it.
But – and this is key – with Britian already carrying the greatest debt percentage of any developed country, neither the Conservatives or the Liberal Democrats propose to cut tax by increasing Government borrowing. Sound like a good idea?
Brown is playing the ‘I was there when we got into this mess, so I’ll be here to get us out’ card. It is a rather limp bluff. Brown has no experience of power during a recession, just experience of deregulating the Bank of England and, by extension, facilitating wild lending and unsustainable growth.
People will eventually see through Brown, sinister smile or not. While not the sole contributor to our financial woes, he was certainly implicit in the “age of recklessness”.
Shadow Chancellor George Osbourne, in today’s Financial Times, argues that were we increase public debt for short term tax relief, “Britain’s international credibility will be further imperiled, future generations will be burdened with even more debt and a recovery would be threatened by the prospect of large tax rises. We would be sowing the seeds of the next crisis.“
The argument of incumbency or precedent should not be an acceptable one. If it held any sway, Barack Obama would still be an unknown Illinois senator. Alistair Darling would still be in charge of our roads. And, to misquote Mr Cameron, “Gordon Brown would be Prime Minister forever.” Shiver.
The Nationwide, HBOS, the RBS/NatWest group and our own Northern Rock have announced that they will pass on the full cut of 1.5% to its lenders in December. It seems Darling’s enticements of “coffee and bacon rolls” sufficiently appeased/threatened bank chairmen to help out borrowers and small business owners.
Admittedly, this will help many homeowners struggling to meet their mortgage repayments. It will also help businessmen borrow at more competitive rates. But a cut in the Bank of England’s base rate wont help the banks themselves.
Because banks don’t tend to borrow from the Bank of England, they borrow from other banks. The Libor, although on the way down, is still far higher than 3%. Any liquidity that the Treasury had hoped the Bank of England’s violent rate slashing would produce will not materialise until the rate of lending between banks dips further.
Governmental and retail pressure has seen banks capitulate in their refusal to alter rates offered to customers. Such political posturing epitomises the mess that part nationalisation has produced for all concerned parties. As preference shareholders in the big commercial banks, the Government (and, by extension, us) should like them to make a quick profit and pay us back. But they won’t make a quick profit by lending at unrealistically low rates.
Furthermore, if the easy availability of debt and mortgages the public couldn’t afford were what got us into this pickle, does anyone really expect more cheap lending to help? People on the high street – the same people who will struggle to make their repayments, who may have to close their businesses – need get used to spending and borrowing less.
The banks are trying to save themselves. But in doing so, they just might be teaching us all a valuable fiscal lesson.
The Bank of England has slashed interest rates by 1.5%, the largest cut since 1981. The new rate of three percent is the lowest since Elvis Presley sang “Heartbreak Hotel”. This is unprecedented territory.
“I think it’s essential that the banks do pass on the benefit of lower interest rates to people and to businesses,” said Alistair Darling, before admitting there was absolutely nothing he could do to make them.
It appears the Bank can’t win. Were it to err on the side of caution (as it has recently,) critics would be quick to point out the measure’s insufficiency. It may now have done too much, too late.
People will panic. If such drastic action cannot persuade lenders to start borrowing at sustainable rates, then what can? Banks’ reluctance shows that they see the profound gravity of the UK’s economy. And the shopper on the street soon will too.
Christmas may well plaster over the gaps in people’s bank accounts. Credit cards will be festively maxed, money woes will be put off until for a less jolly month, and January will bite. People will then realise just how much trouble we’ve got ourselves in. By then it might be too late.
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