A Very Electioneering Budget

Today was the budget, and with the election likely to be called very soon all eyes were on Alastair Darling. This close to the election the budget was inevitably an electioneering one; at some points (especially early on) it felt more like a speech than a budget with political points being scored everywhere. There was talk of 'too many cuts wrecking the recovery' (a phrase we are likely to hear from Labour repeatedly over the next few weeks), and even the declaration of a deal with Belize, home of famed Tory tax evader Lord Ashcroft, for more transparency in their budget!

The budget speech itself can basically be divided into two basic messages. Firstly, it was a case for the defence, with Darling clearly happy to announce that the budget deficit was smaller than predicted (I believe it comes to 11.8% rather than 13% of GDP), the one-time tax on bankers bonuses this Christmas raised two billion pounds we are told, more than predicted. What this means is that Labour can happily paint out a picture of a successful recovery just as we approach the election, much to their benefit. If Labour can successfully argue that their policies have resulted in an economic recovery then the benefits for them are obvious. Of course the opposition parties lambasted the figures, claiming smoke and mirrors.

In many ways it was a boring budget. There were few big announcements, or new ideas, but it was in keeping with Labour's 'steady as she goes' strategy. Any kind of big announcement would have belied Labour's central message, 'We've made the right choices, anything too radical would be a disaster.' Of course you cannot preach moderation and then engage in any big moves. Such a strategy basically depends on fear, which is a very successful electoral weapon. Labour won in 1997 by saying that they would keep the Tories spending plans. Cameron started out his time as leader of the opposition saying he would match Labour spending plans. By talking about cuts Cameron has exposed himself to an easy attack. It is often said that opposition parties do not win elections in Britain, governments lose them. The calm moderate approach of Darling may prove to be right or wrong, but if the public is convinced that the economy is improving, and that Tory policies may put that improvement at risk then Labour is in good stead for the election campaign. Polls show that the figures of Osborne and Cameron do not inspire economic confidence.

The figures from Ipsos-MORI's March political monitor will make for depressing reading for the Conservatives for instance. Economic optimism is up, and between Cable, Darling and Osborne the latter ranks as the least capable Chancellor in the public's eyes.

The second part of the budget was a series of relatively minor bits of change to tax and spend. More support for small business, a higher threshold on stamp duty to make it cheaper to buy a house, a cut in business rates and a 'green investment bank' were the headlines here. All were self-evidently aimed at helping economic growth. Yet while Labour gave, it also took away, but there was a certain shade of Old Labour about the situation as a clampdown on tax avoidance (predicted to raise £500 million) and a freeze in inheritance tax thresholds clearly targets the rich, as does the previously mentioned deal with Belize (deals have also been signed with the tax havens of Dominica and Grenada). Darling also backed a tax on bank transactions, but only if it was adopted globally. Such populist measures have a large electoral constituency right now, with the rage against bankers and general anti-elitist feeling of the time being practically palpable.

Whoever wins the election this budget will be temporary. The Tories back an 'emergency budget' within 50 days of coming into office, whereas Labour promises a spending review in autumn. The temporary nature of the budget is essential as, being an electioneering budget, there are surely things that Darling hasn't done purely for fear of frightening the electorate. All in all, this budget sets up Labour's stall for the election, and to many I expect it will look a very attractive stall indeed.