Alistair Darling insisted yesterday that there would be no ‘giveaways’ in Wednesday’s Budget – while according to the FT, he will outline which government departments are going to get hammered by the first round of spending cuts. ‘People want to see a sensible, workmanlike Budget,’ the Chancellor told the BBC – and with the UK now running a deficit that would make the Greeks wince, and the CBI today predicting a ‘slow and sluggish’ recovery, we couldn’t agree more. However, with the Government still trailing in the polls, this is probably its last chance to claw back some ground on the economy. So we’d be amazed if Darling’s next door neighbour allowed him to get away with a Budget that’s all austerity and bad news…
After the public borrowing figures came in lower than expected last week (albeit still at record highs), some suggested this would give the Government a handy war-chest for some voter-friendly spending ahead of the Election in May. But speaking on the BBC’s Andrew Marr Show, the Chancellor insisted that: ‘the mood of the times is not for giveaways… People are not daft, they know perfectly well that we need to get borrowing down and secure recovery,’ he said. Instead, he would focus on securing future economic growth – so tax hikes (e.g. VAT) that would affect the UK’s competitiveness are out of the question. (Though quite how the likely City-bashing measures fit into that, we’re not sure).
What he’ll also be doing, according to the FT, is fleshing out the Government’s deficit reduction plans by revealing which departmental budgets are going to be chopped after 2011 (unless Stephen Byers can put in a good word for them). Apparently Darling accepts that the Government was not sufficiently ‘upfront’ (i.e. deliberately misleading?) about its plans for the deficit, particularly when it was banging on about Labour investment versus Tory cuts – so the extra detail he’ll provide on Wednesday is intended to buy the Government a bit more fiscal credibility.
But let’s not get too carried away. It sounds like he’s only planning to announce the first round of cuts, with the full horrors unlikely to emerge until after the election (leading to accusations of cynicism from the Tories). And that’s the problem with all this: given the imminent Election, Wednesday’s Budget is as much a political statement as a financial one. So it seems totally implausible that the Chancellor will be allowed to get away with a Budget of cuts – however much he may want to, and however appropriate it may be in our current straitened circumstances.
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