‘Good economics are good politics’ and it’s not in the Chancellor’s nature to play politics with the economy so say his closest allies. But there was no doubt that whilst today’s PBR contained few gimmicks, and was delivered in Darling’s typically dour tone, it was highly political.
With Labour attempting to claw-back a 10-12% Conservative lead in the opinion polls, this was a decisive moment. Alistair Darling pulled the trigger of the General Election starting gun and sharpened the dividing lines of political debate between what Darling called ‘two competing visions’.
Management of the economy has long been a perceived weakness of the Conservatives driven in no small part by scepticism of George Osborne himself. Darling looked to underline to both the public and investors that Labour, not the Conservatives, are best placed to bring the UK out of the recession and to restore growth to the economy. Rather than choking off spending now, Darling announced his ‘steady as she goes’ plan to halve the budget deficit over four years, no doubt breathing a sigh of relied that the deficit has defied nay-sayers predications and crept up by a ‘mere’ £3bn since his previous estimate.
This was also the critical opportunity to sharpen those all important battle lines on spending and tax and for Labour to continue to up their game following their seemingly confused strategy in this area over the summer months.
On spending the terrain is difficult with the public finances giving so little room for manoeuvre. Darling set out plans for greater public sector efficiencies (note there was again no use of the ‘c’ word or Cameron’s age of austerity here). Appealing directly to Labour’s ‘core’ vote, which has proven successful in the polls of late, Darling vowed to defend front line public services – schools, hospitals and policing. This followed Brown’s announcement yesterday for greater restrictions on public sector pay. So far so good, but all policies which sound remarkably reminiscent of current Conservatives policy proposals in their new age of ‘Red Toryism’. Is it more of a case of a cigarette paper rather than political dividing line here, which is emerging?
But on tax, the line is more distinct. Darling’s team were at pains to stress that this speech was about ‘fairness’ rather than ‘soaking the rich’. Privately educated Darling is apparently no class warrior and is reluctant to join in goading the wealth of old Etonians on the Opposition benches.
Yet, despite this, the PBR was clearly populist is tone and continues with the theme of clobbering the rich and bashing the bankers to give to the poor. The headline grabbing tax on bankers’ bonuses were coupled with the continuation of plans to introduce the new 50 pence higher rate of tax and reduce tax relief on pensions for the wealthiest, a reverse in the increase to the Inheritance Tax threshold and a clamp down on tax avoiders.
But, whist this could be characterised as a shift to the left and a return to the class politics of an earlier era, and will no doubt set the tone of the coming election campaign, these were in fact tentative steps from the centre ground. There won’t for example be a windfall tax on the banks nor will there be an increase Capital Gains to mirror the higher rate of tax. Perhaps Labour’s friends in the city, who Labour have so often courted in the last ten year’s, may not fear for their future just yet.
In what looks likely to be his penultimate swansong as Chancellor (whatever the outcome of the election), Darling proved in this highly political Pre Budget statement that the next Election, perhaps more than any other, will very much be ‘about the economy stupid’ and that the election battle has begun.