Pre-Budget Report live blog
Peter Hoskin 3:22pmWelcome to Coffee House's live blog of Alistair Darling's Pre-Budget Report speech. Things will kick off at 15:30 and end at around 16:30. We'll be following it up with plenty of analysis. Stay tuned.
15: 35 Brown is grinning away as the Tories barrack Darling for saying that the Americans admit this all started in America, a distortion of the quote--JGF
15: 40 Darling admits that ‘regulation needs to be made more effective’--JGF
15:42: The volumne level rsies as Darling, incredibly, claims that Britain is 'well-placed' to handle this crisis--JGF
15:43 Excellent to see Tories very noisy, shouting down Darlings more preposterous claims "living within our means," "blame it on America" etc. Keep it up. They need to show raw anger--FN
15:45 Darling says Britain “will be affected more directly by a global financial recession”. Surely a contradiction of his statement that Britain is well placed to deal with the current situation--JGF
15:50 Darling lists his negative growth forecasts and then tries to put the Tories on the wrong side of the international consensus. Here comes the false dividing line, ‘you can adopt a sink or swim’ mentality or ‘you can do whatever it takes to support people through these difficult times.’ Announces a £20bn fiscal stimulus--JGF
15:50 *"Root of these problems is failing in global banking system." No, root is UK government touting underpriced debt and claiming reckless levels of debt were okay.
* He'll put up bank capital requirements. Way way way too late. Failure to do so explains why he owns or part owns five banks, whereas Spain - which regulated its banks properly thoughout its own housing bubble - has no banking crisis. Hence Sanatander owns Abbey, etc. And we all know who set up the UK banking regulation? That chap on Darling's right.
* "UK faces this challenge from a position of relative strength" - Tories roar with protest. Excellent, as it's a lie.
* "We trebled public spending" - yes, borrowed in a boom to do it, hence today's bust.
* "Longest-ever growth" - only by pumping the economy with cheap debt at every slowdown, letting the asset bubble grow ever bigger until it bust. FN
* Forecasts GDP contraction between 0.25% and 0.75% but 1.5% to 2% growth in 2010 - with growth again this time next year. Rather optimistic.
* "IMF forecasting year-long fall in output across all major economics and UK is no exception" - but IMF says UK will fall harder than anyone else. I wonder why?
* "You can choose to walk away, let the recession take its course. That is no action plan". Funny to hear Darling reading Brown's lines without any attempt at sincerity. FN
15:52 * £20bn injection to 2010, he says - unclear if this is a two-year figure? If so that's 0.69% of GDP next year and 2010 not 1% as he claims. Hmmm. Sounds fishy. FN
15:55 Debt to reach 57% of GDP by 2013/14. While Brown looks smug, Yvette Cooper looks petrified. JGF
15:57 Here's the expected VAT cut, the new rate comes in Decmeber 1st and then returns to 17.5% at the beginning of 2010.
16:00 War-time borrowing. Mammoth.
£78bn in 2008/09
£118bn in 2009/10
£105bn in 2010/11
£70bn in 2011/12
£54bn in 2012/13
To put this in perspective, Churchill borrowed £60bn in today's money after WWII. We will be repaying the cost of this budget for years, if not decades to come. Words simply fail. FN
16:00 Labour benches restrained as new 45p rate announced, the Whips have got their media management right here. - JGF
16:02. Darling will hope that his reduction of real terms spending from 2 percent of GDP to 1.2 percent of GDP in 2011 will counter the Tories' "tightening our belts" message. Pity it goes hand-in-hand with colossal borrowing. PH
16:05 Every time, the camera shows the Tory front bench you see Osborne scribbling furiously. He knows that his response is his best chance to show that he is a Tory asset, not a liability. JGF
16:10 * VAT cut coming into effect from Monday then back to 17.5% in Jan10. BUT NOT FOR PETROL - petrol duty will be jacked up, to compensate for VAT fall. That's okay now petrol is down from 108p/litre to 90p but will sting if petrol goes up. This also shows gvt putting a floor of 90/litre on petrol
* Gvt "giving back some £12.5bn to consumers" - no, its the government declining to take this cash. It's not theirs to give.
* "I have rejected advice to take no action" - another line Brown obv inserted into his speech, delivered by Darling without conviction.
* That pre-Crewe £2.7bn tax cut to reverse the damage by the doubling of the 10p starting rate of tax is permanent: what cost? He doesnt say.
* As predicted, whack the rich: "only affect the top 1% of incomes" he says - they already pay 23% of all income tax collected. This ratio was increased only when Lawson CUT their marginal tax rates in 1988. So how much will this raise, once they've called their accountants? He doesnt say. It wont be much.
This is a political, not an economic strategy. It's a snare-the-Tories line, so Cameron says he'll abolish it and Brown can recite St Obama's line about "they want to cut taxes for the rich"
* Then whack the middle class: National Insurance up by 0.5%, but starting point raised so those <£20k not affected he says - lets see what IFS has to say about this tomorrow. FN
1615: The government making targets for 2050—as they are on carbon emissions—they know they will not be in power to be held for account. JGF
1618: It's just hit me: Darling will not, after all, say how he's going to pay off all this debt. His path is simply towards a balanced budget: ie, the point when the debt stops rising. This is a hit-and-run. Ive added up a few of those deficit projections in my head: it will lead to a £1 TRILLION national debt, a point where debt interest payments will eclipse not only defence like it does now, but schools and policing too. It will be up to who wins the ELECTION AFTER NEXT to start to repaying the splurge he's outlining today.
Until we see the actual report, I wont know for sure. But thats how it looks now. FN
1618: There is to be £15 funding for a debt-advice line. Will Gordon be calling for help? JG
1624: This PBR already deserves all the pre-match opprobrium that has been heaped upon it. in the midst of a deadly downturn,t it is a shameless piece of political theatre masquerading as courage. Creating a new top rate of tax of 45 per cent for those earning more than £150,000pa will raise peanuts but is a crude attempt to obscure fiscal reality with the easy passion of the politics of envy. Ditto the removal of the personal allowance from the same category of earners.
I see this as spite rather than strategy. and it does indeed mark the end of something much more fundamental to New Labour than prudence ever was: namely, the recognition that wealth creation was the prerequisite of social justice; that flexible and open markets generate the money that pays for public services and benefits. when Alistair Darling announced his explicit intention to soak those who, in his words, had benefited most from the boom, he renounced New Labour's most potent principle. RIP
- Matthew d'Ancona
1625: We still havent heard the major new tax cut. Child Tax Credit £75 above earnings - is that it? Perhaps so, and he is talking about a £20bn "fiscal expansion" over two years, not one. But the debt levels he outline do suggest a £20bn annual splurge - so I perhaps he's preparing some theatrical finale to wrongfoot the Tories as Brown did in his 2p tax con budget. Brown is smiling away, as if he knows what's coming. Sorry, of course he does, he wrote the speech - but Brown only smiles like that when he thinks he's about to discomfit the Tories. Stay tuned. FN
1628: Darling's sat down, and Osborne kicks off well - pointing out that the measures will bring government debt to £1 trillion. "National debt that has accumulated over centuries; this government has doubled in just 5 years." PH
1632: Osborne is doing anger, good stats on the doubling of the national debt. This is a strong start and the Tory benches are in fine voice behind him. JGF
1633: So far, Osborne's putting in an impressive performance. Rightly brings up the 10p tax fiasco - "Half of these measures are to compensate for the abolition of the 10p tax rate." PH
1635: ‘This Budget is all about the political cycle not the economic cycle’, a strong sound-bite. JGF
1636: Osborne is ripping into Brown, a lot of people didn’t think he had this in him. JGF
1636: Cameron needs to look more confident, he is providing awful visuals with his nervy expression.
1637: To be fair, this is one of Osborne's best ever performances. He says Darling didn't mention the figures for the rise in NIC - "an income tax in all but name". Then claims it represents a £4 billion tax "guided missile" for nurses, policemen etc. Implicitly countering the "Tory cuts" argument. PH
1639: Christ, Osborne is good. Blazing, fiery, angry, doing sums in his head - "growth forecasts vastly more optimistic". This is not just line-learning but incredible mental agility, even Hague couldnt manage it like that. TGF I hope you're watching - THIS is why I have faith in Osborne. Look at all these lines....
"Confirmation of that time old truth that all Labour governments run out of money" - he should have said "other people's money" like The Lady did in 75.
"Labour has done it again: tax giveaways for Christmas paid for by tax rises for life"
"This budget is all about the political cycle and not the economic cycle."
"Delaying the tax rises he announced from that dispatch box only a few months ago."
"Like the gambler who cant give up, he thinks he can borrow his way out of debt"
"Was it America that gave Britain the largest deficit in teh developed world? No.
"No American Treasury claimed he'd abolished the trade cycle, it was the PM who said those ludicrous things. He mistook a boom for stability and never prepared Britain for the bust."
"I doubt the people of this country will be grateful that the Chancellor will wait a year or two before clobbering them for cars"
"He didnt tell us The German and French governments have ruled out a similar (VAT) move
"Extra taxes on the way for millions of hard-working families"
"This is a precision-guided missile ar the heart of the economic recovery"
"Record borrowing or fiscal sanity under the Conservatives."
He finishes off with the most apposite quote: Callaghan's volte face at the 1976 Labour conference where he denounced the course of action Brown is now embarking upon. He didnt quote it fully, so let me.
"We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists, and in so far as it ever did exist." FN
1645: I think that must be the best performance of Osborne’s political life. I suspect the clips on tonight’s news will favour the Tories, quite an achievement. The section where he ripped into the list of things that are Brown’s fault and couldn’t possibly have come from America was particularly powerful. After today, Osborne is out of the dog house and back on the front line. JGF
1645: After Osborne's blitzkrieg, Darling's response to the shadow chancellor seems flat. He tries to play up the novice theme. But this novice just gave the Chancellor (and the PM) a hammering. PH
1647: Big cheers for Vince Cable. He goes for a more muted approach than Osborne, and leads by asking what actual benefit the VAT measures - "saving £5 on a TV" - will bring. PH
1651: Darling seems a bit childish as he begins his response to Cable: "Although I don't agree with a lot of what [he] says, his arguments are more reasonable than those made by the shadow chancellor." Probably a measure of how much Osborne rattled him. PH
1653: Questions from backbenchers now. We'll sign off, and be back with more detailed anaylsis on Coffee House shortly. PH
Previous
Comments
NorthernJohn
November 24th, 2008 3:54pmThere's no blog here. 3.50 now...
David
November 24th, 2008 3:56pmDarling- economic difficulties "not seen for generations".
Er, does that mean he'll no longer be going on about Thatcher et al?
If not, I trust the Tories will throw that comment back at him.
Drew
November 24th, 2008 4:22pmVAT cut not until next Monday - that should mullah the Christmas shopping this weekend.
Wily Trout
November 24th, 2008 4:50pmSo we'll get £5 off a TV that's been imported from China. Am I missing something?
Tiberius
November 24th, 2008 4:52pmFraser, nothing will change TGF's opinion of Osborne. I guarantee it.
Mike, Brighton
November 24th, 2008 4:54pmHave you guys noticed another major tax increase on the "rich":
"the personal allowance will be reduced at a rate of £1 of allowance lost
for every £2 of income over that level until it is halved in value. At this value, the
personal allowance will be worth the same as for a basic rate taxpayer. From
£140,000 of income, the remaining allowance will be completely withdrawn
at the same withdrawal rate, so that people with the very highest incomes do
not benefit from the personal allowance;"
i.e. all high earners will have their personal tax allowance progressively removed. For a £147,000 earner it is the equivalent of a tax rise of just under 5%!!!
Soak the rich!
The Bellman
November 24th, 2008 4:58pmMcSnotty's rictus grin was more eloquent even than tears.
TrevorsDen
November 24th, 2008 5:06pmKen Clarke made absolutely clear he does not agree with the VAT giveaway - he clearly could be seen saying it was not affordable when Darling tried to bring in his newspaper interview.
Clarke was clearly saying the borrowing debt was very dangerous.
And as I said earlier - what about unemployment? Darling gave no prediction although the Treasury must have its figures in order to fund the benefits. No doubt it will come out and be interesting one way or the other.
C Powell
November 24th, 2008 5:10pmPlease can you give us a link to Osborne's reply so that we can see for ourselves.
HJ
November 24th, 2008 5:12pmGordon Brown, budget statement 2007:
"Compared to a deficit equivalent of over £100 billion in a single year in the early 1990s, the figure for this and future years will be £35 billion then 34, 30, 28, 26 and 24 billion."
Alistair Darling pre-budget statement 2008:
"The deficit will be
£78bn in 2008/09
£118bn in 2009/10
£105bn in 2010/11
£70bn in 2011/12
£54bn in 2012/13"
Can anyone spot the difference?
For those that are arithmetically challenged (Gordon Brown, for example), the difference is North of £400bn (and even that is based in optimistic assumptions from Alistair Darling.
This works out at around £7000 more borrowing for every man, woman and child in the country over the next five years. This not the total borrowing, just the extra amount over and above what was forecast by Brown. Not that Brown was ever any good at forecasting budget deficits.
TrevorsDen
November 24th, 2008 5:18pmVAT ?
To cost £12 billion. But will it?
If prices continue to be slashed and if people anyway do not rush to the shops then the cost may well be less. But so presumably will the projected VAT take anyway.
The reality anyway is that if we have an election and if by any chance labour were to win thee would have to be significant cuts over and above those already announced in govt spending.
This whole PBR is just a smokescreen to hide the reality which was just outlined by Osborne.
HJ
November 24th, 2008 5:20pmMy mistake, the total borrowing over 5 years is around £7000 per head. The 'extra' is around £5000. It will, of course almost certainly be much higher than Darling's forecast
However, this is on top of all the borrowing of recent years plus PFI, network rail, public sector pension, etc.
Tom
November 24th, 2008 5:21pmJust discussing this in the office but won't the VAT changes mean that every restaurant menu in the land will have to be re-written? Of course that won't happen, so the change won't really get passed on to the public.
Daniel
November 24th, 2008 5:24pmIn quoting Callaghan, Osborne seems to be implying that we face similar circumstances today. But in 1977 we had high inflation, the opposite of the deflationary spiral we face now. If he can't understand the difference, he needs to go back to his economic textbooks. And if the Tories think we cannot use fiscal policy to help ease the recession, they must explain how monetary policy will do this. Once the Bank has cut interest rates to near zero, the Tories' toolkit will be running on empty. It doesn't sound to me like the basis for a positive election winning strategy. It sounds as though Osborne performed relatively well today, but the message still seems relentlessly negative. Did he explain what the Tories would do instead - given that they too failed to predict the global banking crisis and until recently felt it appropriate to talk about "sharing the proceeds of growth"?
TrevorsDen
November 24th, 2008 5:26pmA great 'talking head' giving it to Kay Burley on SKY .... an election budget which puts the economy at risk.
He really laid into Brown and Darling ... Murdoch must be wondering who let him on.
Wilhelm
November 24th, 2008 5:30pmShifty Alistair Darling.
The longest suicide note in history.
William Norton
November 24th, 2008 5:36pmGot him: he's restricting the personal allowance for people earning £100k+ in April 2010, and then the 45% rate comes in from April 2011 for £150k+. That's fiscal drag with a vengeance (probably copying what Ken Clarke did to kill off mortgage tax relief, I expect) and its effectively a new higher rate band 12 months ahead of schedule.
William Norton
November 24th, 2008 5:42pmDarling is mucking around with higher rate income tax, but announcing it well in advance, to take effect at the same time as he's freezing the lifetime allowance for pension funds.
So, he probably assumes that new super-high earners will try to sacrifice salary into pension funds, therefore he's going to freeze the level at which pension funds are subject to clawback taxes if they grow in value too much. If people invest more in pension funds now, at the bottom of the market, its likely that the upswing from (any) recovery will bring more personal pension funds into the clawback tax trap than would normally be the case.
That's a blatant stealth tax, and another pension fund raid timed to coincide with the higher rate charges.
Actually, I would have thought Darling wanted to encourage higher pension contributions. Right now Pension funds are probably more weighted to bonds (which would help unlock the credit market) and gilts (and Darlign has rather a lot of those to sell just now).
stephenDC
November 24th, 2008 5:42pmNick Robinson is reporting that the losers as a result of the tax changes are:
* those on incomes over £40k and below £100k will pay on average £156/year more
* those on incomes over £100k and below £140k will pay on average £1044/year more
* those on incomes over £140k and below £200k will pay on average £3168/year more
* those earning less than £40k either gain or stay neutral
Can this be right? It doesnt exactly sound like a bombshell.
Tiberius
November 24th, 2008 5:43pmWell if he's done what you say, TrevorsD, he must be a doubly happy "talking head".
oldtimer
November 24th, 2008 5:43pm@Daniel 5.24pm
When you run out of credit, you run out of credit whatever the inflation level may be. That was Callaghan`s problem and why he had to call in the IMF and lost control of the country`s finances. That could easily happen again on the debt projections given today.
Furthermore, interest rates are at 3%, not at 0%. The problem is a credit crunch. Credit problems are not solved by footling price reductions but by measures to ease credit - the essence of the Conservative`s policy.
Paul B
November 24th, 2008 5:46pmGO was magnificent, controlled anger, with Ricky Hattonesque body punches landing with precision, leaving Brown in particular looking grossly uncomfortable.
As for the PBR itself, is that it? Truly risible. The cut in Vat will have no stimulus at all, except at the margins-possible increase in house extensions, where builders will soon be beggaring thy neighbours anyway, and undertaking lots of work for cash in hand.
Its a tinkering budget, thats trying to be all things to all people, trying to buy votes with our money. My god and they accused Lady Porter or gerrymandering.Trouble is, as is often the way when people try to be clever & deceitful, they ain't half as clever as they like to think. Darling has dished up the dogs dinners of all budgets,dubious figures, devious intent given time, I have no doubt it will be come to be damned as the last desperate throes to cling to power by an incompetent, morally repugnant, bunch of shysters.
Tiberius
November 24th, 2008 5:49pmGood point, Tom.
Not for the first time, New Labour fails to understand the administrative hell that their microscopic, fiscal fiddling-about causes.
Temporary std rate of 15% and petrol claims at 17.5% (from Monday), and as you were from New Year's Day 2010.
I hope y'all businesses out there have software that can handle this.
William Norton
November 24th, 2008 5:52pmPretty nasty little kick for the self-employed via national insurance Class 4 (which is the disguised additional income tax for traders): lower limit (the threshold at which Class 4 is levied) incerases by 5% but the higher limit increases by 10%.
So Darling's broadening the band potentially within the higher charge. (The explanation is complicated but this more or less means that certain categories of the self-employed will pay 7% more than they would have done on a certain slice of income.) This catches earnings up to approx £44k - the small businessmen he claims he wants to help. Takes effect April.
Dodge
November 24th, 2008 7:00pmI can't believe this incompetence. VAT cuts means changing every consumer pricelist for all business, masive burden for everyone. If I did it would cost me to reprint and I'll have to put the prices up! Then there's the 2p a litre on fuel duty + VAT. 96.9p/litre today = 97.1p/litre on Monday. Massively expensive tinkering, idiot!
Guy Backhouse
November 24th, 2008 7:37pmDarling & Brown are putting the cart before the horse, it's little more than economic suicide, they are fiddling while Rome burns - IT WON'T WORK. I'm not an economist in the 'professional' sense of the word but mark those 3 capital words. My 3 solutions: 1) VAT should be perceived as an illegal tax if only because we have not had a referendum on the EU, get rid of it we would all be so much better off and might start spending.
2) Reinstate British ownership of our energy companies as first major step towards fairer energy prices.
3) All our major politcal parties are puppets dancing to the tune of big international corporate interests (as was Bush) whips and researchers further endorse corporate interests within the parties, vote independents in or at least thoroughly check your MPs political behavior/voting habits.
jkoper
November 26th, 2008 9:52amDid any one notice that not all pensioners will get a backdated rise. The back date rise will come as a Christmas Bonud Those prudent pesioners who are saving (Defered Pension) for their OLD age do not get a Christmas bonus so will not get the back date. Honest Darling or spining Darling who said all pensioners would get a backdated raise.