Welcome 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
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