Daniel Hannan

Budget 2009: Darling is interested in headlines, not economic recovery

Budget 2009: Darling is interested in headlines, not economic recovery
Text settings

The figures have now become literally unimaginable. Britain will borrow £175 billion this year, £173 billion the year after—a higher total in two years than in the entirety of the 316 years since King William introduced the national debt.

It’s hardly surprising, in the circumstances, that people snatch at the more comprehensible numbers, notably the hikes in higher rate tax. It’s a classic piece of Brownite prestigiditation. Higher levies on those earning more than £100,000 or £150,000 a year will generate little revenue. Indeed, they will probably cost more to administer fthan they raise: wealthy people, in order to avoid the new rate of income tax, will also start avoiding capital gains tax, inheritance tax and other imposts which, at present, they don’t always bother to skive, and capital will be driven overseas.

Then again, the Chancellor isn’t primarily interested in economic recovery. He is interested in shifting the headlines onto something other than debt. His new top rates are intended to ensnare the Conservatives, to force them to declare whether they are “on the side of the rich”.

In other words, the budget is political rather than economic, intended to push the worst of the problems beyond the next election. “Tell me something I don’t know,” you might say. But I can’t think of any other budget that has been so flagrantly self-interested. In 1996 and 1997, with the country still recovering from the ERM-recession, some Tories privately urged Ken Clarke to cut taxes rather than balance the books. The Conservatives were going to lose anyway, ran the argument, but tax cuts might salvage a few seats. So what if the deficit rose? It would be Labour which had to pick up the tab. Ken Clarke patriotically refused to listen. He put country before party, paid off debt, allowed the Tories to suffer their worst election defeat since 1830, and bequeathed a strong economy to Gordon Brown. Eleven years on, we can see what Gordon Brown has done with that legacy.

If you think my analogy is partisan, go back to the last time things were this bad, when we once again had a Labour Chancellor. In 1931, the deficit had grown to £170 million which, in those prudent days, was regarded as unconscionable. The then Chancellor, Philip Snowden, implemented the May Report, which set out cuts of between 10 and 20 per cent for the whole of the public sector: Cabinet Ministers, teachers, soldiers, the unemployed—everyone, in fact, except the judges, who managed to wriggle out of their share. What was the report’s justification? That, since many of the salary rises had been introduced only recently, “they cannot be essential”.

How much more forcefully that argument applies to the massive expansion of the public sector over the past decade. Are all these outreach workers and liaison officers and racism awareness counsellors and regional development consultants truly essential? Labour is mortgaging the country in order to reward its remaining client groups, and thereby minimise the coming election defeat.

Daniel Hannan is Conservative MEP for South East England, and blogs every day at www.hannan.co.uk