The new income tax band on people earning £150,000 is a classic elephant trap for the Tories. Today, afraid of looking like the party of the rich, they could find no criticism for the new 45 per cent rate.
The measure only hits about 300,000 people. In this climate, this is a policy which will attract little opposition.
Alistair Darling promised about £1.5bn today on “thousands of new and modernised social homes as well as regeneration projects.”
The money may soon be there. Spending it is easier said than done, however. Last week I reported on how the credit crunch has hit housing associations. Many are struggling with their finances and development is drying up.
The National Housing Federation – which represents over a thousand registered social landlords – today warned that funding rules need to be changed as soon as possible.*
Are Alistair Darling’s growth forecasts a bit too rosy? The Treasury provide a useful table to help us work it out. The short answer is that the chancellor is more optimistic than the City — but not as much as his predecessor Gordon Brown.
The Darling and City analysts are equally pessimistic about the recession in 2009. But the chancellor sees a stronger bounce back ahead. Economists predict about 1.2 per cent growth in 2010, yet in Darling world Britain will be sailing along at 1.5 to 2 per cent growth.
We won’t do a comprehensive analysis of the pre-Budget report here: there will be plenty of analysis elsewhere on FT.com. But just three observations.
1] The central assumption for RPI next year is -2.25 per cent: ie deflation. That doesn’t necessarily mean that CPI – which excludes house price inflation – will go negative.
The long-awaited report on finance in mortgage markets – by Sir James Crosby – was published today alongside the PBR. This is a big deal. Ministers have been talking for months about how Crosby could hold the key to reviving becalmed mortgage markets.
According to Alistair Darling’s speech, Crosby (pictured) is recommending government guarantees for new mortgage-backed securities. For a temporary period.
This Bloomberg chart tells a striking tale. Credit default swaps are a form of insurance on gilts. People buying UK government debt acquire CDS’s to protect themselves against the risk of the country becoming bankrupt.