The Budget 2009: web grab

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.

Banks need cash more than they need a house

You might have missed it, but you will have woken up on Thursday with a great big present sat at the end of your bed. Well, it wasn’t visible because the present was this. Thanks to swift Government action, we, the taxpayer are now majority shareholders in Royal Band of Scotland. Oh Mr Darling, you shouldn’t have. No, really. You shouldn’t.

RBS announced yesterday that it will give families struggling to make mortgage repayments (and there are a lot of them) a slither of respite, allowing every one six months of breathing space. And a roof over their heads, presumably.

Economists are speculating there could be a total of 100,000 repossessions by the end of next year, way eclipsing the level of house losses in 1991.

Here comes the problem:

• You are a homeowner who cannot keep up with the mortgage. You want mercy from your bank.

• You are a shareholder in said bank. You want your money back, pretty darn quick.

Despite politicians suggesting the contrary, you can’t have both. You can’t make back the £15bn of taxpayer’s money laid out in preference shares while people aren’t giving any money to the bank.

What’s to be done? Peter Mandelson will likely continue to pester banks into lending more, (which they say they are) while being nicer to customers who are struggling.

But this won’t make RBS (or Northern Rock) any more liquid. Banks need cash at the moment more than they need a house so getting payments from customers, in cash, should be a priority. If nobody pays their mortgage, and no repossessions occur, where the dickens are banks meant to find money to repay us?

It’s a pickle, whichever way you wrap it up.

Lower duty on whiskey? I’ll drink to that

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.

An increase in the highest band of income tax to 45% has been treated by many papers as the end of New Labour policy forbidding tax rises. This is absurd. It is merely the first time they have been explicit about it.

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.