Wednesday, March 24, 2010

The Chancellor Who Said Nothing

I actually fell asleep at one point in this budget. Seriously. That's how exciting it was. Pre-election budgets are usually rather more interesting than others. You would have thought that with the state of the economy, this ought to have been the most exciting for years. You would have thought the Chancellor would be outlining specific measures designed to get public debt under control. You would have thought he would have outlined a number of specific tax raising measures designed to cut borrowing.

Not a bit of it.

He couldn't do that, because if he told the truth about the measures he really needed to take, he would have frightened too many electoral horses. The closest he got to doing that was to add another 10% tax on cider, this upsetting the whole of the west country and half of the nation's teenagers at the same time.

This was the budget of a Chancellor who dared to say nothing for fear of losing more votes. He said nothing about income tax, nothing about VAT, nothing about thresholds, gave no information beyond what has already said about how borrowing will be cut, refused to take back the NI increase, commonly known as a tax on jobs.

He announced that stamp duty would be free for first time buyers buying properties under £250,000 - existing Conservative policy, I believe, while stinging properties worth over £1 million.

There were no measures to encourage the banks to lend. It's all very well forcing Lloyds and RBS to do so, but it is the other banks who need the confidence to release liquidity. At the moment they are not doing so - and in some ways understandably. There is nothing in this budget to encourage them to loosen their lending policies.

Darling made a great deal of the fact that Treasury projections say that borrowing will be £11 billion lower this year than predicted. That would be fine, if borrowing was £22 billion. It's not. Projections have reduced from £178 bn to £167 bn. This is not a cause for rejoicing. It's still the highest borrowing of any G7 country.

This seemed a much longer budget than usual, despite the fact that the Chancellor had absolutely nothing to say. Cathy Newman tweeted that he hadn't pulled any rabbits our of the hat. That's because he not only had no rabbits, he didn't have a hat.

It doesn't really matter what commentators like me think. What matters is the reaction of the financial markets. Will they think Darling has done enough to satisfy them and their colleagues about tackling the deficit? We'll soon see.

It was a budget which failed to attack the intrinsic weaknesses of the British economy. It wasn't a budget for growth. It wasn't a budget for savers. It wasn't a budget for business. It wasn't even a pre-election budget. No, the best you can say about this budget, is that it was a Non Budget from a Chancellor with nothing to say.


Unknown said...

I thought the Ashcroft witch hunt was really pathetic - even for Labour. Govt policy moulded around a vindictive hatred of one man? That was disgusting.

Dungeekin said...

That speech will have earned Darling a place in the record books.

Full of sound and fury, signifying nothing.


Tyler Durden said...

reaction from markets:

10y Gilts have sold off heavily after the budget - front futures are off over 50 points and were off even more at one point.

Spenny said...

@ollie, it's an election budget, so of could it's going to try and raise the Tory boogeyman.

The pre-Budget polling data suggests that while the public prefer Cameron as a leader, they also prefer Labour's approach to spending cuts.

That's why the Budget says nothing; no scaring the horses, as Iain says.

Bill Quango MP said...

Waiting for someone to examine the business rates amongst all this talk of smes.
Business rates are rising between 20 and 50% next week. An April Fools trick from the chancellor.
My ow business is hit by a 34% increase and that, undeniably, means job cuts. There is no way to swallow that kind of increase.

The budget says a business rates freeze in October. Too little and much too late. He wants the money now and a freeze later.

Osborne should really get a look at this .Rates increases are based on the height of the property bubble - Summer 2007 and bear no relation to the current climate, but debt is so great that the government cannot afford to not take the money. No matter how many go under because of it.

Unknown said...

There is no reason to target the west country unfairly, this is an unworkable and unreasonable tax. I've made a facebook group.

CityUnslicker said...

Agree Ian, except there were £20 billion of tax rises announced and £18 billion of 'cuts' announced.

So more less tax all around for all of us, yet public spending to increase 2.2% next year.

yeesh they hate the private sector workers.

Martin S said...

Oh, dear. So... nobody's Darling, then?

Still, it did it's job. I.E., to not frighten any electoral horses.

Grand_Inquisitor said...

Were the income tax thresholds indexed? One for the red book small-print readers.

The extra tax on cider is just over the top - helping wine imports are we Alistair?

Cameron's response was very good, very good indeed -he was fired up and had the facts at his fingertips. It bodes well for the election.

Anonymous said...

As for the ridiculous cider tax, think of all those first-time voters who are going to focus on *that* when scrawling their first ever kiss on a ballot paper. Time to get the Wurzels on-board for the Conservatives' campaign song. All together now:

"Oi am a zoider drinker.
Oi drinks it all of the day.
Oi am a zoider drinker.
It soothes all me troubles away. Ooh arr, ooh arr ay,
Ooh arr, ooh arr ay."

Alan Douglas said...

"I actually fell asleep at one point in this budget."

We have now slept together. I must say I came awake with a jolt when that exciting young man got up and started throwing facts and figures at the two giggling buffoons on the government benches.

Alan Douglas

Roger Thornhill said...

Considering we have the prospect of an ADDITIONAL £500bln of yet-to-be-collected taxes over the next 4 years to add to the £800bln we already have, the budget was a disgrace, if not criminally negligent.

p.s. I have just realised that John McFail reminds me of a Scottish Count Arthur Strong.

Anonymous said...

Camerons best ever response !, It actually felt like a reply rather than a pre written script , Gordon looked furious over it !

Dave H said...

I can almost hear Gordon solemnly intoning:

‘This Budget is not about the election, it is about the economy, because that must always remain the foremost priority of a responsible government.

Therefore as a first measure we will clamp down on non-doms based in Belize.’

[roar of delight from Labour backbenchers]

Antisthenes said...

This budget was for the ordinary man in the street who do not understand the finer points or depth of the economic problems facing this country. And only want it to all go away without any inconvenience to them.

To theses type of voters and they are by far in the majority this budget will come over as "Labour has it all under control, no need to worry then" because he made it look like the deficit was being tackled and there would be no real sacrifice for any one other than cider drinkers and they are just young kids and winos. They are not really aware that the real pain is to come after the election. No I think he has done a good job in lulling a lot of people into a false sense of security. For the Labour party a good budget for the country a disaster.

Martin S said...

"Bad request: Invalid host name"

Now it has gone all together. Goihng to be a nasty election campaign.

Unknown said...

A new tax agreement with Belize is an announcement that stands out!

strapworld said...

Iain, You wrote an excellent piece of the good works of Lord Ashcroft. I do wish the Conservative Party would place an advertisement in the press just giving the general public a different slant on this man.

Not an apology just the facts. asking the question just what Lord Paul has done for the people?

Jim Arnott said...

I haven't heard one TV interviewer, commentator or pundit take a Labour politician to task about the optimistic growth projections of the Chancellor.

Whenever they try, the subject is ignored and just about anything but the growth figures is waffled on about.

Has anyone calculated the effect on the deficit if growth figures are 1.25% to 1.75% less than projected by the Treasury? How the Treasury's long-term growth projection of 3.5% can be contemplated is beyond me.

I really would like to know what effect a growth rate of only 2% would have on the deficit. This after all, I think, is a figure put forward by some research bodies.

Unsworth said...

So how much real cash is Darling going to 'recover' from Belize? And how does it compare with the Billons unaccounted for in the budget?

Does he think that Ashcroft is that bleeding stupid? I think he does. What a pillock.

Mulligan said...

Tyler Durden

Really? The radio station I was listening to claimed that the budget was well received in the markets, even though the FTSE seems to have flatlined.. (it wasn't BBC either , although I'm sure that many commercial stations are so relaint on government advertising that they'll say whatever they are told to)

Unknown said...

And just where are these first time buyers going to get a mortgage for these stamp duty free houses below £250,000?

With a minimum 20% deposit requirement you'd need £50k to start with. And to get a 200k mortgage with "sensible" lending criteria you'd need at least 50k+ annual income. How many first time buyers are in that position?

Most first time buyers would be lucky to afford a 150k house so this is just a headline gimmick without substance.

JMB said...

It was rather sickening to watch Brown smirking as Darling came up to the bit about Belize. Shows what a pathetic person he is.

Janner said...

Jeff Randall on the money as usual

Well worth watching his programme that was broadcast at 7pm

Had Timms on the ropes when challenging him on the debt, not the deficit (overspend)
This has been carefully ignored(and I note that the BBC has been ignoring it too)

Yep in 5 years it will be £1.4 trillion! If the cost of servicing that debt remains the same as today (which is very unlikely) that will cost £63bn a year

He had a Gordo quote that debt repayments on this scale were 'the cost of failure'.....

Interesting interviews too - city very unimpressed

Plus the outrageously optimistic growth figures - from a 'fragile recovery' to >3% growth in a year....?

None of this is on the BBC

I wonder why

Janner said...

I stand corrected - it was finally mentioned on the 9 news

Mind you JR still seems far more objective

Unknown said...

You would have also thought that the Chancellor would have cancelled Trident, the £97bn nuclear weapons replacement program that not even the UK military wants...but he didn't.

Unsworth said...

@ starfish

JR is also more incisive than anyone on the BBC. Mind you, how difficult is that?