Page last updated at 16:04 GMT, Thursday, 18 March 2010

Pre-election Budgets of the past

Chancellors are always tempted to indulge in a pre-election giveaway, whether they can afford it or not - but do they ever work? As Alistair Darling puts the finishing touches to his Budget Brian Wheeler delved into the archives...


A giveaway budget would be "a vulgar piece of economic management below the level of political sophistication of the British electorate," declared Roy Jenkins, after steering the economy back into a modest surplus. The voters seemed to agree. Some say the bounce in Labour's opinion poll ratings which followed his Budget prompted Prime Minister Harold Wilson to call an early election, which Labour promptly lost. Some Labour figures blamed what they saw as Mr Jenkins' overly-cautious Budget, but bad trade figures announced four days before the country went to the polls, may have had a more decisive effect.

GIVEAWAY RATING: Too tight for some

ELECTION EFFECT: Unexpected defeat for Labour


Even if he had known he was putting together the final Budget before a general election, Antony Barber would not have dared to indulge in pre-election tax cuts or spending increases. The economy was already overheating after his failed dash for growth and was being rocked by wildcat strikes and rampant inflation. His March 1973 Budget was chiefly notable for the introduction of VAT, at a rate of 10%, one of the conditions placed on Britain by its entry earlier that year into the EEC. The Daily Telegraph said Mr Barber's Budget had done "very little to reshape the forces working in the economy".


ELECTION EFFECT: Zero. Ted Heath's snap February 1974 poll took everyone by surprise


February 1974's election resulted in a hung Parliament. In the first budget of the minority Labour government, Denis Healey increased income tax by 3%, taking the basic rate to 33%. He also made good on his pledge to squeeze the rich "until the pips squeak" by putting up the top rate of income tax from 75% to 83%. His proposed wealth tax was postponed, but he increased corporation tax by 12%. Two Conservative MPs wore Chairman Mao suits in protest. Harold Wilson went to the country again in October 1974, gaining a tiny majority of three.

GIVEAWAY RATING: Wealthy got a clobbering to pay for public spending

ELECTION EFFECT: Labour just about clung on

Denis Healey
Labour's Denis Healey was forced to ditch his pre-election giveaway

In the year leading up to the 1979 election, Denis Healey presided over a mini economic boom but any goodwill he might have generated was wiped out by the crippling strikes of the "winter of discontent". Healey had big tax cuts planned for his final pre-election Budget - but he was forced to abandon them when Labour lost a confidence vote in the Commons, forcing an immediate election. He had to cobble together a Caretaker Finance Bill instead, with the co-operation of the Tories, to keep the machinery of government ticking over until polling day. There were a few pre-election morsels, such as a 12% increase in pensions and £1 a week on child benefit, but inflation figures were worse than predicted and Healey's incomes policy was in tatters. He did, however, manage to hide the true state of the public finances from his opponents by neglecting to publish the usual "red book" of Treasury figures on which the government's spending and revenue plans have to be based. Labour still lost.


ELECTION EFFECT: Not the game-changer Jim Callaghan needed to prevent a Tory victory


Sir Geoffrey Howe's fifth and final Budget did not generate much enthusiasm among the public, but with the Conservatives 14 points ahead in the polls after the Falklands war it did not need to. Overall tax reductions amounted to about £2bn for individuals and £750m for business but some in his party were disappointed by his failure to cut the basic rate of income tax.


ELECTION EFFECT: Negligible. Tories already on course for victory


Nigel Lawson slashed 2% from the basic rate of income tax and froze a variety of excise duties in a buccaneering pre-election Budget, which saw him boast that the government had achieved the impossible - cutting taxes, cutting borrowing and raising public spending (although he froze child benefit in cash terms). It led to Labour accusations of a "bribe" Budget - and fuelled what turned out be an unsustainable economic boom - but it seemed to do the trick for the Conservatives at the ballot box.

GIVEAWAY RATING: Huge. The mother of all pre-election bonanzas

ELECTION EFFECT: Cemented Tory victory despite high unemployment

Norman Lamont
Norman Lamont's pre-election budget put Labour on the back foot

With John Major's Conservatives apparently heading for defeat and the economy in the depths of recession, Chancellor Norman Lamont threw caution to the wind by announcing tax cuts for low paid workers, paid for by an increase in borrowing. The markets reacted badly but it went down well with voters, signalling a clear break with the Thatcherite past and forcing Labour into opposing the introduction of a lower income tax rate. Shadow chancellor John Smith's response, cheekily unveiled on the steps of the Treasury, was to propose tax increases on people earning over £21,000 a year to pay for raised tax thresholds and a boost to pensioner and child benefits. But his proposed increase in the top rate to 50% prompted Tory accusations of a "tax bombshell" and arguably lost Labour the election.

GIVEAWAY RATING: Generous in the circumstances

ELECTION EFFECT: Helped John Major to unexpected victory


With the economy now powering ahead, Ken Clarke resisted calls for a tax-cutting bonanza to buy votes - despite his party trailing badly in the polls. The result was a cautious, "steady as she goes" Budget, with modest tax cuts and a continued squeeze on public spending. An underwhelmed Sunday Times said the only political message it sent was that, if re-elected, "the Conservative government will not do very much and will do that little rather badly".

GIVEAWAY RATING: Modest tax cuts not as big as some Tories wanted

ELECTION EFFECT: Negligible as John Major headed towards long predicted heavy defeat


By his fifth Budget in 2001, Chancellor Gordon Brown was really throwing open the public spending taps, on the back of a booming economy. His March Budget was a classic pre-election giveaway, with a £1bn extension of the 10% tax band, along with a further £1bn targeted at families with children. He also confirmed that there would be a sizeable Budget surplus - £16.4bn instead of the £10bn he forecast the previous November, and that he would repay a record £34bn of national debt. With Labour well ahead in the polls, there was little Tory leader William Hague could do to prevent a virtual re-run of the 1997 Labour landslide.

GIVEAWAY RATING: A bonanza for public services and families

ELECTION EFFECT: Not much. Labour were on course for victory anyway


With many independent forecasters pointing to a "black hole" at the heart of government finances, Gordon Brown resisted the urge to indulge in a pre-election splurge, focusing instead on a cautious, long-term approach. His main aim was to counter Tory "vote now, pay later" warnings. But with the polls pointing to a Labour victory he could afford to be dull.

GIVEAWAY RATING: Few real gainers

ELECTION EFFECT: Didn't scare the horses


There is certainly no spare cash for tax cuts or any other kind of giveaway in Alistair Darling's pre-election Budget. The main pressure will be on him to come up with a credible plan to cut Britain's record budget deficit. But he will also want to throw in a few pre-election sweeteners - perhaps a boost for high tech jobs paid for by savings from a lower than expected unemployment bill. Nevertheless, independent experts such as the Institute for Fiscal Studies say Mr Darling will be forced to deliver a "treading water" Budget.

GIVEAWAY RATING: By necessity, it will be very modest


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