of the Exchequer Alistair Darling last Monday delivered his
eagerly awaited Pre-Budget Statement. It was aimed to protect Britain
from the worst of the economic crisis that is rolling around the world
but it seems unlikely it can have much impact.
Nevertheless, it is far better than the only alternative offered
by the Tories – back to the days of “unemployment is a price worth
paying” and swingeing public spending cuts.
Darling began by reporting that the economy had shrunk and will
continue to do so for the next two years – and many believe that is
wildly optimistic. Inflation is expected to be replaced by deflation.
Government borrowing will rise to record levels: £78
billion this year to £118 billion next year. But this compares
with a current level of personal debt on loans and credit cards of
Prime Minister Gordon Brown and Mervyn King, the Governor of the
Bank of England are now pressuring the banks to use the Government bail
out money they have been advanced to revive the housing market and pile
on yet more consumer debt.
The consumer is still expected to do the lion’s share of risky
borrowing to get the economy going again, in spite of the associated
evils of long working hours and stress that go with it.
Three billion pounds-worth of capital spending will be brought forward
from 2010 and 2011 and used to build motorways, secondary schools and
improve homes as a way of creating jobs. But generally there will be a
sharp cut in the rate of public spending – so probably more jobs cut
VAT is to be cut from 17.5 per cent to 15 per cent to encourage
consumer spending. This will reduce an item priced £100 to
£97.50 – hardly enough to tempt consumers when they are already
overburdened with debt and doubt about their jobs.
Darling is going to tax the rich – but only a little bit more and
only after the next election. The higher rate of tax will rise from 40
per cent to 45 per cent, applied to incomes over £150,000-a-year.
Interestingly this is just above £141,866 – the annual salary of
Cabinet members. It will take an upper rate of 95 per cent to make a
The poorest pensioners will be a little better off as the pension
tax credit level for a single person rises from £124 to
£130 and from £189 to £198 for couples. And all
pensioners will get a one-off payment of £60 in January. But no
news about raising the basic rate of the state pension or restoring the
link with average earnings.
There is talk of building more “affordable houses” but not council
houses. And since no houses are being built right now, a handful
amounts to “more”.
There will be a project to fill 500,000 job vacancies by speeding
up training and recruitment. This will not create a single job. It will
help some people to get the jobs, meaning that others won’t.There will
some measures to help “small businesses” – but big businesses are in as
much trouble as their smaller cousins. On Wednesday two high street
giants – Woolworths and MFI – both called in the administrators.
More big names are expected to follow as, in spite of Gordon
Brown’s best efforts, consumer spending continues to plummet. There
will be no Government bail outs for these companies and thousands of
jobs will be lost as they crumble.
Union responses to the package were mixed. The civil service
union PCS was suspicious that “efficiency savings” were likely to
translate into cuts in jobs and services – with tens of thousands of
civil service job cuts already in the pipeline.
Though PCS did welcome the creation of 6,000 new posts in Job
Centres to cope with the rising tide of benefit claims, the union
voiced suspicions this would be met by cutting other posts with the
Department of Work and Pensions.
Derek Simpson, joint general secretary of the giant union Unite, said
the Pre Budget Statement “gives Britain a reason to be optimistic this
Christmas and beyond”.
“This is a welcome warm up exercise after 30 years of inaction
and neo-liberal economics. Gordon Brown has thrown-off the shackles of
new Labour to reveal the real Labour,” he said, with more optimism than
But he and his co-general secretary, Tony Woodley, went on to
compare it with what the Tories would have done. In that light, their
praise has some justification.
The GMB response was also an attack on the Tories’ “hair shirt
policy of ‘if it isn’t hurting it isn’t working’ policy, which led to
four million on the doles in the 80s.”