You would have thought that the prime minister would now have his public sector spending numbers at his fingertips - given that David Cameron has made the issue his focal point for three sessions of Prime Minister’s Questions in succession.

Apparently not. “Capital spending…will fall after 2011″ he said. Then, later: “Capital spending will rise to 2011 and then fall.”

This is less wrong than his previous PMQ claim that capital spending would keep rising until the Olympics (2012).

But it’s still wrong.

There was a clarification towards the end of the half-hour session when Brown said that in fact the figure would fall in 2010. His admission came after prompting by a Tory MP who reminded him that the Treasury’s own capital spending figures show £44bn this year and £36bn next year.

Some pundits are wondering whether Cameron should start following a different strategy and stop using up all his questions on the same theme. They ask whether the impact is blunted by repetition. I’m not sure. After all, Brown’s reputation was built on his solid grasp of numbers.

UPDATE

I forgot to mention Brown’s preposterous claim that the Tories were expecting unemployment to rise in the coming years - as if he was not.

Surely the Treasury’s own economic forecasts are based on unemployment rising substantially from today’s levels? Given that this is the consensus of almost all independent forecasters.

The charge against Gordon Brown is that his promise of future investment - instead of cuts - is cloud cuckoo land given the grim public finances. You may think this unfair.

But here is the verdict of the governor of the Bank of England today when asked about the national deficit:

Mervyn King:

“The speed of which the fiscal stimulus should be withdrawn has to depend on the state of the economy. …The scale of the deficit is truly extraordinary. 12.5 percent of GDP is not something that anybody would have anticipated even a year or two ago. And this reflects the scale of the global downturn.

But it also reflects the fact that we came into this crisis with fiscal policy itself on a path that wasn’t itself sustainable and a correction was needed.

There will certainly need to be a plan for the lifetime of the next parliament, contingent on the state of the economy, to show how those deficits will be brought down if the economy recovers to reach levels of deficits below those which were shown in the budget figures.”

Two thoughts on the politics of the 50 per cent tax rate.

1) Alistair Darling has given the Tories a ticket out of tax raising jail

The move on the top rate is rightly seen as a political trap for the Tories. (George Osborne hasn’t taken the bait; he has said he has no plans to reverse it.) But the bigger headache for the Tory leadership was always the fact that they would have to pass the bill to implement the higher rate, if they win the next election. This was already upsetting the right-wing grassroots. Darling has now spared them from having to do the tax-raising dirty work.

2) Labour have broken a manifesto commitment

It was always a dubious argument, but when Darling proposed a 45p rate back in November, the implementation was delayed so that Labour could claim it was sticking to its manifesto commitment not to raise the top rate of tax.

Now the measure will be in force by April, meaning Labour will have broken a core manifesto pledge. The advantage? The Treasury will pick up one month of extra tax income before a May 2010 election, raising about £100,000.

Was it worth it?

It was only a small promise but gives some insight into how the government works.

Darling promised £50m on housing for the armed forces, with a grandiose pledge:

“I have one further announcement to make about housing for a particular group. The whole country is united in admiration for the courage and professionalism of our Armed Forces,” he said. “I want to ensure this admiration is reflected in the quality of their accomodation.”

The detailed figures in the Budget red book show that the Treasury expects to spend an extra £50m on armed forces accomodation in 2009-10. But in the subsequent year, it will claw back £25m from this budget.

In other words, the real figure is £50m minus £25m……or just £25m.

The Budget scorecard (see p10) is far from clear in outlining the full extent of the raid on high earners. But the footnotes give a rough guide to how much extra the exchequer will be collection from people earning more than £100,000.

In 2012/13 the Treasury expects to be collecting about £7bn a year. Most of that is from people earning more than £150,000. About £1.5bn comes from the removal of the personal allowance, £2.4bn from the new 50 per cent rate, and £3.1bn from cutting tax relief for pensions contributions.

Sounds a lot of money to be grabbing from a group of people who have proved rather shrewd in arranging their tax affairs.

How much will this hit high earners? According to the Treasury, those earning £110,000 a year should expect to pay about £2,000 more in tax; those earning £150,000 pay about £2,600 more; those earning £200,000 pay £7,600; and those FT readers bringing home more than £500,000 will have to pay £37,600 a year more.

Being leader of the opposition on this Budget Day was like shooting fish in a barrel.

The forecasts didn’t predict a U-shaped recovery but a “trampoline recovery”, said David Cameron.

Predictions from the November PBR of a 1 per cent fall in GDP (it’s now 3.5 per cent) had turned out to be “utterly useless” and a “work of fiction”.

Continue reading "David Cameron scores the easy hits"

Counting the same number twice is very New Labour.

So far I’ve spotted one example already in today’s Budget.

1] Chancellor to set up new £750m investment fund to focus on emerging technologies and biotechnology to promote research and development. (Which, incidentally, is said to be rather a long way off)

2] £405m in new funding to encourage low-carbon manufacturing.

It turns out that £250m of the latter is coming out of the former, which does not yet exist. Somewhat typical.

You can see how much of a squeeze the government is in by looking at the figures for its tax receipts.

Projections for 2009/10 are:

Income tax £140bn (against an estimate of £152bn in 08/09)

VAT £63.7bn (£78.4bn)

Capital gains tax £2.2bn (£7.8bn)

Stamp duties £5bn (£8bn)

Inheritance tax £2.3bn (£2.9bn)

Petroleum revenue tax £1.1bn (£2.6bn)

As a result, the total take by HMRC is expected to be £394bn this year, against an estimate of £427bn last year and £451bn the previous year. Ouch.

Total receipts, which include business rates, council tax and vehicle excise duties, will be about £496bn against £548bn in 2007-8.