Here is the strange and interesting thing about the pre-budget report that Alistair Darling delivered yesterday: whatever can be said about it, the opposite is also true. So this was a PBR "going for growth", the chancellor promised – except there was no extra stimulus for an economy that has shrunk nearly 5% this year. It was going to soak the rich, ran some of the more excitable commentary – and while the tax on bankers' bonuses was present and correct, it was less a soaking and more a gentle, predictable spray. The PBR took "no tough decisions", jibed the Conservatives, but it lopped £7bn off public spending and jacked up national insurance contributions by £3bn – fairly tough in anyone's book.
Like the sphinx without a secret then, this was a PBR without a theme. When he was chancellor, Gordon Brown turned his autumn statements into a mini-Queen's speech of policy proposals and boastfulness. His successor does not have such economic or political leeway, to put it mildly. Boxed into a corner by the looming general election, deep recession and an Alpine overdraft, Mr Darling went for small manoeuvres – measures for boilers and bingo, broadband, and businesses for ex-service personnel. There are two ways of looking at this: the first is to say that he displayed reasonable ingenuity in the face of a desperate shortage of tax revenue. The other is to say that he should have been bolder – with another £15bn of stimulus money and a wider reform of the tax system.
As Mr Darling kept reminding MPs yesterday, it was a bold government that propped up the banking system last October and which pumped billions into an economy on the brink of a slump. It was a bold government that averted a rerun of the Great Depression. While the prospect of a global crisis has receded, the world economy remains volatile – as the recent meltdown in Dubai demonstrates – and the outlook for the UK economy remains bleak. Yet the end of this year will bring an end to most of the fiscal stimulus package, leaving the UK reliant on ultra-low interest rates, a devalued currency – and the hope that the rest of the world's consumers and business are ready to go shopping for British exports. That combination, the chancellor is gambling, will mean national income grows 3.5% in 2012 – and he is betting the house on it. Making that bet even more unlikely, he has pencilled in the start of the big squeeze on tax and spending for 2011.
The timing here is crucial. Cut public spending before the private sector is back on its feet and thousands of workers outside the southeast – employed by the state either directly or indirectly – will go on the dole without any hope of getting another job. Let us be clear: the budget deficit does need to be reduced, but to chop it before the economy has come off government life-support is inviting disaster.
Leaving timing aside, Mr Darling can plausibly argue that he is trying to mark out a progressive and fair way of paying down the debt. That does mean turning to guaranteed big revenue-raisers such as national insurance, and trying to reduce public spending without hitting frontline services (although it may be a long time before the MoD sees a new aircraft carrier – and toll roads are about to become very fashionable). He is right on that. He was right, too, to put money towards free school meals and more generous child and disability benefits. But he would have been even better off trying to get more money out of capital gains and green taxes. That would have helped set the terms of debate for how Britain reduces the debt while rebalancing a lopsided economy.
But Mr Darling's objectives may have been rather more short-term. Amid awful circumstances, he did enough yesterday to secure a few not-entirely-awful headlines. This close to an election, and that far behind in the polls, that may be the best Labour could have hoped for from yesterday's PBR.
Copyright Speakers Corner 2017