Personally, I believe that every cloud has a silver lining, and in this case it's that we're barely more than a year away from a General Election. Ad I detect more than a few hints of electoral desperation in Alistair Darling's announcements.
Take, for instance, the 'soak the rich' measures. Raising the tax burden on those earning more than £100,000, and further ratcheting up the pain above £150,000, makes little economic sense. Many commentators have pointed out that by the time a proportion of those affected have left the country, taking their job-creating skills to countries that will welcome them, and others have revisited their tax-planning (read 'avoidance') strategies, it's quite possible that the Treasury will suffer diminished revenues as a result of the initiative.
But, crucially, such measures play well with the Old Labourites in the Trades Union movement. And their money will be crucial in bankrolling the forthcoming election. In the past, in Blair's time, the party could have counted on the financial support of wealthy business figures. A few of them may genuinely have left-leaning tendencies; most wanted to curry favour with those in power. This time, I'm sure Brown realises it'll be an uphill battle: for a start, he is personally loathed by many of the party's erstwhile supporters; perhaps more to the point, those in business who previously backed his party are still smarting from the train crash he caused to the economy. And even those whose support was wholly pragmatic, based on the storing up of favours, will surely not stump up for New Labour in the run-up to the plebiscite, on the grounds that the party is unlikely to win.
Interestingly, while there was a vague commitment to £10bn of efficiency savings in public spending, further elaboration has conveniently been left until after the Election. It's my betting that Darling had a quiet word with the brothers heading up the principal public service unions to reassure them that this was merely rhetoric and it would quietly be forgotten in the unlikely event that the party secured a further term.
Worryingly, the Government that revealed the highest real-terms public borrowing projections for any peacetime UK administration unveiled no plans to address the chronic problems that need to be overcome before the country is to begin its long journey back to solvency. The punitive cost of final-salary pensions for public sector workers, the productivity gap between the public and private sectors (and implied overstaffing in the former), the hard core of elective unemployed and fallacious long-term claimants of Incapacity Benefit, uncontrolled immigration and resultant pressures on public services and the unsupportable number of people going into further and higher education courses of doubtful value are just a few of the challenges any administration that's in for the long term will need to overcome.
Darling's Budget did precisely nothing to tackle any of these glaring problems, the most obvious of which is the need to slash discretionary public spending - including areas such as public sector pensions - in order to help the debt burden reduce over time. My guess is that this is because they don't expect to be in power much longer and would rather hand the poison chalice of having to take unpopular measures to the Conservatives.
A generation ago, we might have fallen into the trap and positioned ourselves as 'the nasty party', slashing public spending across the board, resulting in reductions in services, as a consequence of which, as soon as people felt affluent again, they'd vote us out of power. Today, though, I believe the party is committed to the harder, but ultimately more rewarding path, namely cutting that which is genuinely non-productive and driving efficiency savings in the productive and valued areas of public services. So a Conservative future shouldn't mean fewer nurses and police officers, though they may have to get used to money purchase pension plans, and the days of early retirement, often in workers' 40s, on spurious 'ill health' grounds should soon be history.
So if there's one positive I take from the Budget, it's that Darling sidestepped all of these issues, which makes me think he and his colleagues realise the game's up. The downside is that the country will be left to drift for a further year, and some damage could be done in the meantime - in particular, some talented entrepreneurs who might otherwise have created much-needed employment will undoubtedly quit the country in favour of other nations where the fiscal environment is more welcoming - but at least there's now light at the end of the tunnel.
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