In a much longer speech that expected, Alistair Darling referred more often in his speech to ‘tax’ rather than ‘help’ but the clear intention was to portray a theme that the economy is in better hands now – coming through the recession – with Labour than with the ‘reckless’ Tories who would cut public spending harder and faster if they win power in May. That will be the clear election message from Labour.
A prospectus that focused on core Labour voters with promises to make the rich ‘pay their fair share’, as Gordon Brown did in his speech to last year’s Labour conference, but also reached out to the business community which is having increasing doubts over the Tories plans for corporate taxation.
Much predicted, the Chancellor noted he had borrowed £11bn less than expected – and with the banker bonus tax, efficiency savings and public sector wage and pensions savings – he would be able to achieve a £20bn reduction in borrowing levels.
Interestingly the Chancellor de-coupled the planned announcements on departmental savings away to a press release later on Budget Day – rather than facing the ire of Labour backbenchers in the Commons. Not a word on specific departmental cuts in the speech and consequently most voters will be left guessing where the axe will fall. By mid afternoon we would see there were planned cuts in the DWP budget of £500m by 2012!
Headlines will focus on the scrapping of Stamp Duty on properties up to £250,000 paid for by a higher 5 per cent levy on properties over £1m – the so called Mansion Tax proposed by Lib Dem Shadow Chancellor Vince Cable.
The SME sector – for he knows that small business owners are real voters – was the centerpiece of a package of support for business which will include a commitment from Lloyds Banking Group and RBS to lend £94bn to business in the coming year with at least 50 per cent to the SME sector. Darling also created a new quango – to allow business to appeal bank credit decisions.
Darling’s plans to fast track new bank entrants through the FSA application process will have an impact on the sector. But the Conservatives are likely to muddy these waters if they win power and dismantle the FSA.
Plans for the intended restrictions on higher rate pensions relief – announced in the PBR – will go ahead – again not many Labour voters in that category!
In similar vein the Government is pressing ahead with the 50p income tax rate. The DWP will launch a consultation on scrapping the default retirement age and will look at options including raising the age or scrapping a default age completely – potentially easing the pressures on workplace pensions but likely to add more to the costs of business.
On wider savings policy – the ISA regime got a boost with the Chancellor announcing plans to increase ISA limits every year in line with inflation. On current numbers this would increase the new £10,200 allowance [from April 2010] by around £200 a year.
With an Election set to be called on April 6 – what actually makes it into Finance Act which will have to be passed in the coming week will be worth watching – the full package may not make its way into law before polling day.
The markets appear to have priced in the Budget with the FTSE barely moving by the end of the speech.
The phoney war is almost over – we are days away from the campaign proper.
We will be offered government either as the ‘helping hand’ or government ‘to cut the national overdraft’.
It really is time to decide.
Cicero Consulting director Iain Anderson