The abuse of the word “progressive” continues. In his Budget speech yesterday, George Osborne said:
“Overall, everyone will pay something, but the people at the bottom of the income scale will pay proportionally less than the people at the top. It is a progressive Budget.”
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Forget the waffle about cutting £12bn of waste out of government from the Conservatives and £11bn of efficiencies from Labour. We now have a firm policy from the Tories: to cut £6bn (or 2.8 per cent) from government departments’ 2010-11 budgets. The savings will be used to fund reductions in national insurance contributions for employees and employers. What can we say about this policy:
- Deep, clear and immediate budget cuts. The £12bn headline reduction in “waste” is, in reality, a simple cut of £6bn in departmental expenditure limits for 2010-11
Alistair Darling said today the Ministries would provide details on £11bn savings by 2012/13. Below is a breakdown by Ministry. But you can save yourself the detail: almost all of the departments list the same cost reduction plans (with worrying similarity). Almost all of the savings are expected to come from:
- Reducing the cost of procurement, often via ‘collaborative procurement’
- Reducing the cost of arms’ length bodies
- Streamlining back-office functions
- Reducing the use of consultants
- Property/estates costs
- Energy savings
In savings-size order:
Click on the chart to see some full size, interactive charts. This is Chris’s data, collected from pre-Budget Reports and Budgets over the past few years.
Alistair Darling will allocate £100m to fill in potholes. That small sum got into his speech. But what new did we learn about filling in the £167,000m black hole in public finances? Nothing.
Yesterday, I wrote a courage checklist for Mr Darling to see whether he had the balls and integrity to tell the British public the implications of his own deficit reduction plan. The scorecard is as follows: Read more
Mr Cameron’s says Budget is “pitiful”.
Claims stamp duty cut has been Conservative policy for three years. Cider plans likewise claimed as Tory policy. Labour officials have historically opposed the policies they now embrace.
- Conservatives will set up an independent budget board
- Freeze council tax
- Lower small business tax
On specific policies:
- Budget shows slew of new taxes, tax bombshells timed to go off after election
- Growth forecasts too optimistic -
Chris Giles will be posting later. Meanwhile, you can watch the budget. Or read Alistair Darling’s speech.
- Winter fuel payment will be guaranteed for another year - £250 or £400 to be received by pensioners, paid for by closing tax loopholes
- No-one over 75 will pay tax on the first £10k of income, from next year
- Extra £4 per week for all children whatever the marital status of their parents
- Tax evasion: £0.5bn extra revenue expected
Alistair Darling says the Budget is all about choice – choose Labour and get measures that get growth going; choose anyone else and suffer the consequences.
And what about explaining how to lower borrowing? Read more
Will Alistair Darling’s budget tomorrow reinforce the image of Labour as a tired government ready to lose or as a party that understands the challenges of coming years and knows what it would do with power? Although the Budget looks likely to have been written by losers, there is still a chance the chancellor is a winner at heart.
If he is, Mr Darling will have to tick quite a few boxes in my courage checklist. I do not expect any big economic or fiscal numbers to change, so courage is defined by how much he is willing to tell the British public about the government’s existing fiscal plans: Read more
Labour is planning to lose the 2010 election. That is the only sensible interpretation of the mood music two days before the Budget.
What would a government be planning if it were confident of victory or thought it had a fair chance of being in power in six weeks’ time? It would be preparing a Budget that told the British public how it had reasonably successfully weathered the financial and economic storms of the past two years and it would prepare the public for the inevitable pain of fiscal consolidation in the years to come. In short, it would start to clean up its own mess. Read more
The FT is reporting today that Alistair Darling will announce public sector net borrowing of about £170bn for 2009-10 in the Budget next week, about £5bn to £10bn better than his previous forecast from December. As I said yesterday, this still means borrowing is terrible – about 12 per cent of national income, not 12.5 per cent.
If you compare the FT’s report this morning with City and independent commentators yesterday, you would notice the FT is not as bullish as the City. Read more
The past two years of public finance figures have been pretty grim for Alistair Darling. Lows have included, busting unbreakable fiscal rules; watching borrowing reach a peacetime record; and accepting Britain’s debt is no longer internationally respectable. But with 11 months of the financial year gone and six days before the Budget, the chancellor now appears to have choices.
Central government tax revenues are down 6.2 per cent compared with the first 11 months of 2008-09. The Treasury thought they would drop by 7.2 per cent. In a full year, this gives the government about £5bn to play with. Spending is also growing slower than planned, but there might still be a March splurge as departments know the axe is coming down soon. Read more
Almost everyone agrees Britain needs to cut its budget deficit. The action is needed whether it is because British government debt is rising at an unsustainable pace; because there is a sizable risk that the cost of servicing each pound of debt will rise sharply; because we think it is unfair our children should fund our profligacy; or because spending much more on debt servicing limits government’s ability to spend money on things we really care about.
The question is how fast. In this big debate, there are two sorts of people: fundamentalists and equivocators.
The fundamentalists include almost all politicians. Gordon Brown insists fiscal tightening now is dangerous for the recovery. On the opposite side, the equally fundamentalist David Cameron asserts that the truth lies with the reverse argument. “To get the economy moving you’ve got to lift the black cloud of the deficit,” he says repeatedly. Business organisations, such as the CBI and IoD are fundamentalists. And many economists have also been overcome with fundamentalist tendencies, as evidenced by the spate of letter writing to newspapers.
The other group are equivocators. These people are reasonably sure there needs to be a credible plan to reduce the deficit, but are unsure about its timing, its effects, and whether history tells them very much. Many Treasury officials I know are equivocators, so was the recent Green Budget from the Institute for Fiscal Studies, so are significant elements of the Monetary Policy Committee and, to my surprise, so is the governor of the Bank of England. Mervyn King is often portrayed as a fundamentalist on fiscal policy, but his answers at the latest Inflation Report (pages 7 to 9) can be summarised as: ‘The effect of fiscal policy on the economy? Well, it depends’. I am also firmly in the equivocators’ camp.
Being unsure about the best policy is rather uncomfortable, feeble even. But I’ll try to explain why the decision is so difficult. Read more
This morning, great digging by Financial Times journalists has come up with the estimate that the Treasury will raise £1.5bn from its supertax on bank bonuses, considerably more than the chancellor’s £0.5bn estimate in December, but less than the £4bn banks were predicting in January.
Government insiders told the FT that the chancellor intended to use the money for “small targeted measures”, perhaps including schemes to tackle high youth unemployment and industrial support. Of course, in his Budget, expected on March 24, Alistair Darling will not have got his hands on the cash yet. The tax is payable only at the end of August 2010. But since that is just a timing issue, it will not stop the distribution of goodies ahead of the election, expected on 6 May. The chancellor has three sorts of sweets from which to choose. Read more