Page last updated at 17:41 GMT, Wednesday, 24 March 2010

Darling makes pre-election pitch in 'holding' Budget

By Iain Watson
Political correspondent, BBC News

Alistair Darling
The chancellor drew dividing lines with the Conservatives

We have become used to pre-Budget reports - statements which the chancellor delivers in autumn before the official budget in the Spring.

But this year we have had the rather unusual spectacle of a Pre-Budget Budget.

That's because there is a general election in the offing and if the Conservatives win, they have promised an "emergency budget" of their own within 50 days of victory when, they say, they will set out plans to begin cutting public spending quicker than their predecessors intended.

But the Conservatives' opinion poll lead - once a stratospheric 28 points - has been narrowing since the start of the year and is now hovering around 5%.

If Labour stage a recovery before polling day and win the election then it might be assumed that we would then wait another year before they deliver their next budget.

But there could well be not one, but two, de facto budgets in between.

Labour would launch a post-election comprehensive spending review (CSR) which would set out more clearly cuts to departmental budgets that would be necessary to bring the budget deficit down.

And the pre-Budget report in the autumn might become something of a mini Budget in its own right.

The Liberal Democrats have said the two bigger parties are not being honest - at least before the election is held - about the scale of cuts required. That's possibly for good political, if not economic, reasons.

Recent polling suggests voters are squeamish about the prospect of cuts to government spending even if they are also worried about the scale of public debt.

'Holding statement'

So today, at its core, we had something of a holding statement from the chancellor - a revenue neutral budget. But weeks away from the general election, he still had to make it sound inspiring and not austere.

This was a particularly difficult task for Alistair Darling, a politician known as "a safe pair of hands" who makes a virtue of caution, rather than as an orator in the Obama mould. Or indeed any mould.

BUDGET 2010: AT-A-GLANCE
Force state banks to lend more
Crackdown on tax evasion
Tax hike on strong cider
Bank accounts for all citizens
Green investment fund

He did his best to point to a better future once the economic gloom of recent years finally lifts. He talked about a budget for growth, with investment in infrastructure - including a high speed rail link, initially from London to the Midlands - in the years ahead.

And his new green investment bank held out the prospect of more support for "green jobs" and "green energy" such as offshore wind farms, which he no doubt hopes will also create a better political environment for his party.

He also wanted to convince the markets, as much as voters, that he was serious about getting the budget deficit down - outlining in very general terms £11bn of "efficiencies" to be found by government departments - and by announcing that each department would publish the details.

'Sweeteners'

This could be seen as something of a down payment in the process of debt repayment but potentially much bigger cuts to departmental budgets still wouldn't be announced until after the next election.

But he was mindful of not falling in to a trap which, it is widely believed, one of his Labour predecessors careered into headlong.

Ahead of the 1970 election, Roy Jenkins declared that "a giveaway Budget" would be "a vulgar piece of economic management below the level of sophistication of the British electorate".

COMPLETE BUDGET DOCUMENTS
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In the very short term, he appeared to be right as Labour's position in the opinion polls improved after his Budget speech.

But the party went on, unexpectedly, to lose the election which followed.

Vulgar isn't usually a term used to describe Alistair Darling but he made sure money was moved around to offer up some goodies - higher winter fuel payments for the elderly for an extra year, paid for by closing tax loopholes.

These would in part be closed by reaching a new agreement with Belize, the Central American country where the non-dom Conservative Deputy Chairman Lord Ashcroft has many business interests.

This raised cheers from the Labour benches but the politicking didn't end there.

The measure to exempt first-time buyers from stamp duty on properties priced below £250,000 in the next two years was well trailed.

In other words, this would be a tax cut for some - though the policy was first suggested by the Conservatives in 2007.

But what had not been trailed before the chancellor's speech was that, to pay for this, stamp duty would rise on properties worth £1m or more.

This appears to be at least as much a political as an economic decision, designed to portray Labour as a party that can deliver "fairness" even when the purse strings are being tightened.

If the Tories were to reverse this, they would of course be denounced as party favouring the privileged rather than the wider population.

But under a Labour government, tax increases for the many, not just the few, are in the pipeline. A new 50 pence top rate of tax on that portion of incomes over £150,000 had already been announced, and will be introduced next month.

This will affect very few people but a rise in national insurance contributions pencilled in for next year would hit many, many more - and the Conservatives say they are working out whether they could afford to reverse this.

Challenge to Tories

The chancellor decided to give the opposition further challenges today.

By introducing short-term tax breaks for small companies to help them though difficult economic times he will be hoping that the Conservatives, committed to making earlier cuts to get the deficit down, would be forced to say these are unaffordable, and in the process would alienate some business interests.

If, however, the Conservatives sign up to these, then Labour will say that as a result the opposition would have to identify further public spending cuts to pay for them.

But perhaps the most political part of the budget was the rather lengthy narrative which the chancellor indulged in near the beginning of his speech, reminding voters of the action the government took to prevent a damaging recession turning into an even deeper depression.

He said, that despite the downturn, the claimant count - unemployed people in receipt of benefits - is lower than when the current government came to power in 1997.

Labour still trail in the polls but believe their allegation that the Conservatives would wreck a fragile recovery is being given increasing credence by a wary electorate as polling day approaches.

In his Budget response, Conservative leader David Cameron pointed out that even a lower than predicted deficit still represented a higher amount than all previous Labour governments had borrowed, added together.

He focused not on unemployment as a whole but youth unemployment, which he said was the highest in Europe.

And he also made it clear where he would be happy to increase unemployment, at least by one - that is, the ousting the current prime minister from Downing Street.

Labour 'obituary'

The Conservative leader asked the electorate today if they really want five more years of Gordon Brown.

The Liberal Democrat leader Nick Clegg did more to set out where his party would make cuts though he also dismissed the Budget as Labour's "obituary".

But apart from the traditional political insults, the key dividing line at the forthcoming election appears to be how the parties intend to handle the record deficit, and how quickly.

Those arguments were well rehearsed in the Budget speeches.

For all the extensive coverage of the grubby expenses scandals, and the politicians' high-minded talk of a cleaner, greener future, the election is indeed likely to be decided - as Bill Clinton's team once put it - on "the economy, stupid".

Particularly, on which party has the most sensible response to what has been the worst crisis in seven decades.



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