3:30pm: The House is in confrontational mood and Darling is off on a party political point scoring exercise straight away. First mention of aspiration, the new political buzz word.
3:35 Darling has just, as expected, downgraded his growth forecast for 2008 to 2 to 2.5%. Darling has adopted the Brown strategy of death by figures and throwing international comparisons around like confetti—a sure sign that there is something to hide.
3:40pm Here’s Fraser’s early take:
1) Language. It’s pure Brown! Right up from the preamble to weird sentenced like “Britain: the fastest growing major economy in the world”. You’d think the speechwriters would attempt a slight stylistic change. The result is simply hilarious. With Brown sitting beside him it looks like a Keith Harris-Orville type scenario.
2) Growth. Of course, Britain is not the fastest-growing. There are 31 developed countries tracked by the OECD. Of these, 18 – ie most – have grown faster than Britain.
3) Downgraded… His 2% to 2.5% range for 2007 is consistent with the downgraded forecasts of 2.2%.
4) Noise. The Tories are shouting, derisively. You never got that with Brown. Their tail is certainly up.
5) Deficit – £38bn. That is massively higher. In April, the Budget forecast £33.7bn. And yes, this means Britain has the largest deficit in the EU15. As the OECD points out, it is the first time our country has had this dubious honour since records began in 1970.
6) Defence “The longest expansion in defence spending 30 years” – a statistical fiddle. It is the first expansion in 30 years, simply because defence spending fell since the Cold War. We’ll pick over defence spending later.
7) Intelligence budget – “Trebling in cash terms” of some weird joined up police/terrorism budget – new, ergo hard to disentangle. NB, Trebling in cash terms is economic jargon for “not trebling at all” as it doesn’t take account of inflation.
3:45 pm Here comes the counter on nom-doms. He says that any proposal has to be fair, workable and affordable. Darling is now mocking the Tory numbers, but they’ve lost this political argument already.
3:50 pm More from Fraser:
1) Nobel: “Britain has more nobel prize winners than anyone outside the United States”. Has he ever wondered why so many of these UK nobel winners also live in the United States?
2) Private Equity: That’s it, taper relief abolished – that’s massively increased tax on private equity from 10% to 18%. New York’s financiers will be delighted – a huge slew of business is now coming their way.
3) Non doms: Yes, he has moved to ape the Tory proposal. But its not clear what. Brown was laughing as if it was the funniest thing he’d ever heard.
4) Londoners, beware: Book your removal vans before the Goldman Sachs partners start hitting the phones in about half an hour’s time.
4pm The Brownites love to talk about how they encourage school sport but the raids on lottery funding that the Olympics have made necessary have actually reduced the amount of money going to grassroots sport from the lottery from £397m in 1998 to £209m in 2006. That number is just going to drop further as we get close to 201. Sport for the few, not the many.
Here’s Fraser’s verdict:
4:05pm Darling just came out with the 2007 version of Labour investment versus Tory cuts. Raising the inheritance tax threshold to £700,000 but pushing the £2bn difference with the Tory plan into health and education. But didn’t Philip Gould warn them in that famous memo that this trick wouldn’t work again?
1) The Easy Jet tax proposal. He seems to have adopted the Tory proposal to tax aircraft, not passengers – is a shameless theft of Cameron’s proposal. Wasn’t it in the last April budget that Brown’s proposal was to add £5 per passenger tax? What changed his mind in the meantime?
2) “For the first time incapacity benefit is falling” – In his dreams. The falls have been tiny – statistically insignificant. Click here to see the woeful lack of progress since Aug99 (2.35 million) and Feb 07 (2.43 million). IB has been stagnant under Labour, and Darling should be ashamed.
3) Inheritance tax – This is in effect doubling the threshold from £300k to £600k. The way Brown and Balls squealed with delight, this is obviously intended to screw the Tories (like so much of government policy). It looks dodgy… We’ll get back to you with the forensics.
4) That’s all folks – Just 33 minutes. Minimising the nation’s exposure to Darling. Osborne’s attacking on the “you nicked my budget” line – and rightly so.
The abolition of taper relief is a massive attack on entrepreneurs, not just on private equity; although unclear from the speech it seems that capital gains tax will go to a flat 18% instead. This is what one firm of accountants have to say:
4:15pm Fraser is going through the White Book: Defence spending will indeed fall as a share of government spending, from 9.46% in the current financial yes to 9.29% in 2010-11.
The changes we saw today to taper relief are clearly motivated by the heightened focus on private equity. We are extremely disappointed with these proposals as they threaten to undermine the entrepreneur culture that has blossomed over the last decade. Complete abolition of the taper removes a large incentive for entrepreneurs and challenges the ‘Dragon’s Den’ success of the UK. It also represents a fundamental retreat from his predecessor’s key policy.
The taper applies to many more areas than private equity and this will increase the tax paid by many employees of companies which offer other share incentives.”
In the Treasury briefing: On inheritance tax, the Chancellor has simply let the allowance be transferred on death of one partner. Crucially this is retrospective and impacts 3m widows and widowers (who are, of course, highly likely to vote). But what if you die and remarry? “Sounds like this will lead to a lot more fiddles” a colleague says to me.
Fraser writes: I now have the costings. This is indeed a tax raising budget. By 2010-11 they plan to net £1.4 billion extra in tax. Highlights are: £440m a year by “state second pension white paper reforms”…. Sounds dodgy…. Raise £500m from non doms, lose £1.4 billion on inheritance tax (nb Tory proposal would have cost £3.5bn) and £900m from the raid on venture capitalists plus £500m on the new airline tax. In the first two years this would be a net loss to the Exchequer, but overall taxes are up.
Comments