A plan of few words

17 December 2009 8:00 am

Nic Cicutti

It may seem strange to write an epitaph for the current Government now when it looks likely to remain in office for at least six months more but after Alistair Darling’s pre-Budget performance last week, it seems pointless to wait any longer.

In fairness, it was not as if the Chancellor could have done things any differently. The truth is that Darling had almost no room for manoeuvre. Taking with one hand while appearing to give with another was the best he could do under the circumstances.

After all, the Government is now reaping the dual consequences of a ravaged economy and a vast and growing national debt. It desperately needs to balance the books while at the same time pretending that doing so does not involve massive cuts that threaten to reverse many, if not all, the spending pledges made by Labour over the past decade and more.

Faced with that dispiriting scenario, Darling had little to offer those - including members of his own party - who were listening to him in Parliament last week.

Yet the sad reality is that even in his last pre-Budget speech to the House, Darling could not avoid some of the pathetic rhetorical tricks that have bedevilled politicians of his party throughout their 12 years in office.

For example, the claim that since the end of 2007 and up to the third quarter of this year, the recession had led to cumulative economic contraction of 3.2 per cent in the US, 5.6 per cent in Germany, 5.9 per cent in Italy and 7.7 per cent in Japan.

Then, giving the figures for the UK, the Chancellor avoided giving the same cumulative figure - which would have shown a fall of 5.9 per cent, preferring instead to give one purely for the current and year as a whole, in which he claims the UK economy will have contracted by 4.75 per cent. Moreover, the fact that Germany, the US and Japan are already recovering from the recession while Britain is not is likely to make the disparity between their figures and ours seem even more stark by the end of the year.

Then there was the way Darling announced the 0.5 per cent increase in National Insurance for employers and millions of employees - as compared with the one-off windfall tax on bonuses to bankers.

The former proposal, which is expected to raise upwards of £3bn a year and will affect everyone earning more than £20,000 (in fact, experts believe it will hit even those earning £14,000 a year) was done and dusted in a mere 66 words.

At normal speech-reading speeds, that is about 15 to 20 seconds’ worth of time. Blink and you might have missed it - and many did miss it, initially.

By contrast, the far less significant bank bonus levy, widely trailed in the media for days, took almost 240 words to explain, about 60 seconds’ worth of time.

It all reminds me of the 10p starting rate of tax announcement by Gordon Brown a couple of years ago. To outsiders, it was apparent within minutes what the impact would be. Yet the statement was gabbled out so fast that few if any MPs understood what was happening at the time.
With hindsight, it is amazing to recollect how, a dozen years or more ago, journalists such as me trailed Darling around conference halls and meeting rooms as he gave vacuous speeches to business and other audiences about all the wonderful things Labour would do in office.

I remember many IFAs who turned into New Labour converts almost overnight, one becoming so active in the cause that he even confessed to me his ambition to leave the industry and enter politics, with the ultimate aim of becoming an MEP. I always thought that was a tad optimistic of him - never mind opportunistic.

In any event, all that enthusiasm is spent today. For all its empty promises, Labour turned out not to listen even to those who wanted to be its friends.

The original Isa proposals to replace Peps were a shambles, threatening to remove tax benefits from savers rather than add to them. Stakeholder products, with the exception of pensions, were so uncompetitive that providers found it easy to deliver even better products than those unveiled by the politicians.

Despite counter-proposals from the CML and other experts, taxes such as stamp duty went unchanged by the Treasury and ended up penalising millions of hard-working home purchasers instead of being reformed so that only those higher up the buying scale would pay them.

Then there was the scandalous treatment of the 125,000 occupational pension scheme members, denied a proper retirement income for years - during which time many of them died - after they acted on advice given to them to save into their company plans. Hundreds of thousands of Equitable Life policyholders were treated in a similarly shabby manner, briefed against as middle-class opportunists by ministers and Treasury spin doctors.

The reality is that, when the election is called next spring, it will have been lost by Labour as least as much on the battleground of personal finance as on the battlefields of Iraq and Afghanistan.

Both are issues where no one believes the Government any longer. Darling’s speech last week merely confirmed the fact.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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