In today’s Times, Peter Riddell looks ahead to the Budget in March. He hits the fiscal nail on its rusty head:
“The economic outlook for the next few years is worse than for some time and Mr Darling has no freedom for manoeuvre on taxes and spending. Not only is there no room for preelection giveaways, but spending plans are insufficient to achieve existing goals on health, education and reducing child poverty.
The Government blames international factors, notably the sub-prime banking crisis in the US. At the same time, ministers highlight low levels of inflation and of interest rates compared with the early 1990s. Both points are true up to a point but, as the [IFS] Green Budget shows, the deteriorating fiscal position is largely home grown.
Looking back to 1997, Labour has succeeded in reducing both the structural budget deficit and the overall debt burden below inherited levels but a large majority of other industrialised countries have done more to cut both.
In particular, fiscal policy was not nearly tight enough during the good years…
…What matters is not just the state of the economy, but more whether the Government is seen as competent in managing the economy. Labour is already losing its edge here to the Tories. The good years so far this decade may be gone, not only economically but also politically.”
The IFS Green Budget – which Riddell refers to – made the finding that the Treasury will need to raise taxes by £8bn to meet the Government’s borrowing and spending plans. The whole document’s well worth a read.
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