There’s nothing new in the world. Cuts versus Growth. The old Labour mantra of “Tory cuts” we last saw under the Thatcher/Major era is set to bounce back as the central element of next year’s general election campaign following the pre-Budget report.
Alistair Darling used the PBR to create a clear political narrative and dividing line between himself and the Tories – and to delay the announcement of the real cuts needed to address the deficit.
Some of this is soundbite politics but Darling stead- fastly refused to be drawn on specific public spending cuts at this stage in a comprehensive spending review.
Meanwhile, the Conservatives have been having an active debate within the confines of the right-of-centre thinktanks on a cuts-specific v cuts-general approach to the current crisis.
The ad men are already using nostalgia to promote consumer goods through the recession. So expect to see poster ads in the spring which take you back with pictures of scissors attacking public services as part of Labour’s line against the Tories.
For both parties, the question will be – will there be more in their April manifestos about a cuts-specific agenda?
In reality, the Tories will need to be more specific as the current opposition. From January, I think we might expect the Tories to do so. Their own private polling suggests that the electorate is keen to hear how the Government will tighten its belt.
The National Insurance hike is getting the immediate headlines but the PBR points to the more fundamental attempt to rebalance the UK economy away from financial services.
The supertax on bankers’ bonuses is purely the stuff of political theatre but it may just make some relocate from UK plc.
However, incentives to encourage the pharmaceutical and biotech sectors to drive the new jobs – talked about for several Budgets and PBRs – are now starting to become significant. More sector-specific fiscal incentives are starting to creep in to every speech moving UK plc away from finance.
Any Treasury – whether Labour or Conservative – will need to be reminded that just five years ago, the financial sector produced almost 35 per cent of the corporation tax take – and for 2009, that number will be just 15 per cent. Policymakers really do need to ask the question – just where is the growth and the jobs coming from in years to come?
With nothing to give away – the Chancellor has pushed ahead with his restrictions on higher-rate savers through pensions as well as phasing in the personal accounts’ regime.
The Government is, no doubt, going to promote the Isa regime in the spring when it moves to increase limits for everyone.
Alistair Darling has been put into a number of Government jobs since 1997 in order to pacify the electorate. He calmed commuters down as Transport Secretary and just made the Department for Work and Pensions really dull. In cont- rast to the more flashy George Osborne, Labour is painting its team as calm in times of crisis.
The markets have respon- ded initially with barely a whimper. Some of the banking stocks moved up. But let’s see just where we are in the next few days when everyone has had time to reflect.
The polls have narrowed – the Conservatives have dipped below the all important maj- ority-giving 40 per cent in the polls and there is just the sense that, while it is unlikely that Labour will win the next election outright, we may be moving closer towards a hung Parliament. The Opposit- ion is nervous and the Government seems to have more fire in its belly.
We are likely to see growth for the final quarter of 2009 but there is a sense that the first quarter of 2010 will be very difficult for the UK consumer and the Tories should be set to capitalise on this. The Pre-Budget Report 2009 sets the final narrative for the next election. 2010 – game on!