Ready for your close-up, Darling?

At 12:30 today, Chancellor Alistair Darling will deliver his first Budget. Don't expect much good news...

Last Updated: 31 Aug 2010

To be fair, the Chancellor doesn’t have a lot of room for manoeuvre. The global economy is creaking at the seams – yesterday the central banks, led by the US Federal Reserve, were forced to inject another $200bn of funds into the money markets to try and ease the tension. At home, the nationalisation of Northern Rock has left him with an extra £100bn liability on the public balance sheet (although he probably won’t count it as such). Inflation is rising, house prices are falling and the government’s budget deficit keeps widening.

So we shouldn’t expect big tax cuts – Darling can’t afford it. But although he badly needs more cash, big tax hikes could push our fragile economy over the edge. So any increases are likely to focus on easy targets like booze, cigarettes and gas-guzzling 4x4s.

Unfortunately, the Chancellor also seems to see business as an easy target – at least relatively speaking. In addition to his well-publicised and controversial CGT hike, he’s also planning to put up the small business corporation tax rate to 22%. Just what you need ahead of a year when profits are expected to be down across the board.

And he’s also likely to endorse his equally controversial non-dom plan, which will mean foreigners who are resident in the UK get charged a flat £30,000 per year for the privilege. Whether you agree that this is a reasonable way to tax the earnings of a super-rich elite, or whether you think that the government is mad to undermine one of the key reasons why top talent has flocked to these shores, this is bound to have serious implications for the Treasury’s relationship with the Square Mile.

If you’re feeling adventurous/ frivolous, you can also divert some of your shrinking wage packet to betting on some of the more trivial aspects of the Chancellor’s Budget speech. As well as the old favourites like length of speech, tie colour and so on, apparently you can get 1000-1 on Darling dyeing his eyebrows green to prove his environmental credentials, and a (disgracefully stingy) 200-1 on him necking a bottle of Newcastle Brown Ale while at the dispatch box. A better bet might be that this turns out to be Darling’s last Budget – although you’re unlikely to find very long odds on that…

About the one thing that we can guarantee is that his predecessor (who’ll be sitting alongside him looking serious) will be inwardly endorsing one of his favourite quotes: ‘There are two types of Chancellor: those who fail and those who got out in time’. Clearly Gordon Brown was one of the latter. Problem is, if Darling proves to be a failure, he might well take the Prime Minister down with him...

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