Effects of credit crunch may force Labour to hold off on election

Mar 13 2008 by Tomos Livingstone, Western Mail

It was redistribution, but from the master of the understated statement

Alistair Darling was sent out to bat on a sticky wicket for his first Budget as Chancellor. Political Editor Tomos Livingstone assesses how the new boy performed

WHAT a difference a year – and a change of Chancellor – makes. Last year Gordon Brown boomed out a pre-coronation income tax re-jig to cheers from his MPs. This year Alistair Darling has nothing half as eye-catching to announce, and struggled to keep MPs awake, let alone cheering. One even left halfway through.

It was goodbye clunking fist, hello gentle prodding.

Mr Darling has a soothing tone and a reputation (at least before Northern Rock and the missing data discs) of being a safe pair of hands. He could be announcing the end of the world but would do so in a voice that would reassure you that things would turn out just fine.

What is coming to an end is a decade when a Labour Chancellor could stand at the dispatch box and roar about the longest period of economic growth since the Dark Ages, and dole out billions of extra cash for schools and hospitals.

Mr Darling noted helpfully that we were still doing a bit better than Japan, and had a few handouts for public services. With the economy slowing and a gap in the public finances, the truth is he did well to find enough to fill a 50-minute speech.

Much of it was waffle, such as “it is right to allow fiscal policy to support monetary policy over the period ahead in helping maintain stability in the face of the global downturn”, and announcing he was telling the Bank of England that its remit was still the same as it was in 1997.

It was the end of the Brownite buzzwords, too. Gone was “prudence”, forgotten the ridiculous “locking-in” of various policies. Mr Darling prefers “stability” and “resilience”.

Traditionally the Budget statement is heard in silence, but some MPs struggled this time around. Several Tories amused themselves by shouting “Northern Rock” and “What?” at various points.

But should the subdued Labour backbenches have been so quiet? Given the scope for manoeuvre he had, Mr Darling did rather well. He had to admit that the economic slowdown was going to last longer than he had previously thought – possibly meaning a 2009 election is now on ice. With 2010 now the year when the public finances get back into surplus, maybe that’s a more likely election year.

But he still found a way to raise £790m more in tax in 2009-10 and £1.85bn the next year – bad news if you drive a massive car, fly a lot and get through the whisky. The money will go on a bigger winter fuel allowance for pensioners and higher child benefit.

So why were the cheers not louder for what looks like a bit of old-fashioned redistribution, albeit on a small scale? Perhaps Mr Darling, unable to wave a fist let alone make a clunking sound, is just never going to get anyone too excited.

Drinkers hit by alcohol tax rises
Wine-drinkers who enjoy a glass or two with their dinner face a tax hike after yesterday’s Budget slapped 14p on the price of a bottle. Beer drinkers will see the price of a pint go up 4p while duty on a bottle of whisky is up 55p. Duty will rise 2% more than inflation in each of the next four years.

But in a break with tradition, the increases will be deferred until midnight on Sunday, rather than coming into effect immediately – good news for rugby fans hoping to toast a Welsh Grand Slam.

The Conservatives said Mr Darling was wrong to target all drinkers will a blanket tax rise.

More money for child poverty pledge
The greatest beneficiary of Alistair Darling’s tax raid on drivers and drinkers are likely to be children living in poverty. The child element of the tax credit system is going up £50 a year, and a planned increase in child benefit to £20 a week for the first child is being brought forward a year to April 2009.

Those changes would leave families with two children and a household income below £28,000 more than £130 a year better off at a cost to the Exchequer of £340m.

And from October next year, parents’ income from Child Benefit will be disregarded when calculating Housing and Council Tax Benefits, saving a working family with one child on low incomes £17 a week.

Mr Darling said the reforms would lift up to 250,000 children out of poverty and maintain progress towards the Government’s goal of halving child poverty by 2010 – and eliminating it altogether by 2020.

A Commons select committee and economic experts have warned that the 2010 target would be missed without a major new investment.

Ann Clwyd, the MP for Cynon Valley and one of 76 Labour MPs to sign a letter at the weekend calling for action, said, “Tackling child poverty is also about tackling deprivation in communities and improving education and opportunity. This Labour Government is continuing to do all of those things.”

Huw Lewis, the AM for Merthyr and Rhymney and the chair of the Child Poverty Expert Group in the Assembly, said around 25,000 Welsh children would be lifted out of poverty, bringing the overall figure down to 145,000, as a result of the Budget.

Green tax hikes used as a way to raise revenue
WITH little room to boost the Treasury coffers through income tax, Chancellor Alistair Darling turned to indirect “green” taxes as a revenue-raiser yesterday.

Drivers of heavy polluting cars face a new “showroom tax” while those who drive greener cars could pay no road tax at all.

But environmentalists said Mr Darling had “dropped the ball” on green measures by postponing a planned 2p rise in petrol duty by six months.

He said the delay was necessary to reflect the rising price of oil around the world.

From 2009 there will be new bands of road tax for the most polluting vehicles. From 2010, lowest emission cars will pay no tax in first year.

The “showroom tax”, paid in the first year for a the most polluting cars, will be set at £950. The measure will bring in an extra £735m for the Government by 2010-11.

Mr Darling said, “It is right that if people choose to buy a more-polluting car that they should pay more in the first year to reflect the environmental cost.

“The changes will provide a real incentive to manufacturers and motorists.”

As well as the plans to charge for plastic bags from next year, there was also a pledge to make all new non-domestic buildings zero-carbon by 2019.

The pledge comes on top of the existing goal for all homes to have no net carbon emission by 2016, and Mr Darling said it could save 75m tonnes of carbon dioxide over the next 30 years.

The Government is also aiming for all new public sector buildings to be zero-carbon by 2018.

But environmentalists said Mr Darling’s decision to delay a 2p rise on fuel duty until October undermined his green credentials.

Greenpeace executive director John Sauven said, “Darling’s safe pair of hands have dropped the ball on climate change.”

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