As someone who has spent most of his career in technical tax my inevitable reaction to any Pre-Budget report is to dive into that press releases and detailed announcements to work out what is going on.
Writing this a few hours after Alistair Darling sat down its time to reflect on just what the announcements really mean in a broader context. In doing so I will, for the moment, largely ignore numbers: that they will be wrong is the one thing of which we can be sure. They are more concerned with the political and broad economic messages of the PBR.
Politically it is very clear that significant blue (or is it red?) water has opened up between our leading political parties and what common ground there is between the Lib Dems and the rest is between them and Labour.
The Conservatives have taken an enormous and completely reckless gamble. Their hope is that their irresponsibility now (irresponsible because no government in power could do what they are recommending) will be ignored when it comes to the election when, they hope, recovery will only just be starting, at best. They will then claim that the medicine has not worked.
But Labour does for once appear to have seen that coming. Whilst I think that the VAT stimulus is wrong, and that the price of that will be seen in the level of borrowing after the next election, there is a lot in this package which is politically astute. The VAT cut is easy for many people to understand even if it might not work. If it does not work then it may well be because businesses do not pass the cut on and then the government has a clear target in the business community to attack, and they are the friends of the Conservatives.
The announcement that top rate of tax will be increased will be politically popular. The increase is small enough to prevent any serious risk of increased avoidance. Those who say they will go will, I am sure, be shown the door with some enthusiasm. We now know that very few of them added any value to the UK economy.
The moves to increase pensions in line with the highest possible rate of inflation are astute. Everyone remembers the 75p fiasco of a few years ago.
The move to limit the value of the personal allowance is a clear message that can be advertised that the government is going to limit abuse by the high paid, although I admit I am biased: I think this comes straight out of the Missing Billions report that I wrote for the TUC. I've certainly not seen it elsewhere.
Small business has been given some genuine relief: the tax carryback is sensible, although it will only help companies and will have little impact on the self-employed. The small loan guarantee scheme is definitely something they will find it hard to argue with: Osborne is on a sticky wicket with that one.
Confirming this year's tax cuts for the low paid is simply pragmatic, but welcome.
To put it simply, on tax and there are very few banana skins in here.
The same is probably true of the rest. This is no green new deal, but there are green jobs; plenty enough to suggest that a real boost for the local economy will happen. The Tories will not be able to respond to that.
The move against tax havens is just as clever. The wordings in the press releases are diplomatic: I got no sense of that from the speech itself. There I got a measure of sheer frustration in the way in which Alistair Darling delivered the announcement. And the delivery time scale is short, which is welcome. But he will have to act on it: the Edwards report of 1998 is still on the shelf. But when the election comes in 2010 Darling can say that this was a problem created offshore by bankers and that he will tackle it and them: the Tories will have no response.
There were disappointments, of course: the new tax exemption on dividends to be received by large companies opens a clear avenue for abuse by them and additional opportunities for them to use tax havens. The abandonment of legislation on income shifting means that this abuse will continue, largely amongst those well able to pay their tax. So Vince Cable was right: not enough is being done to tackle tax avoidance.
But this was at the end of the day an intensely political statement. If it was just a competition between Darling and Osborne I have not one doubt about who has won: Osborne appeared callously indifferent and wholly without arguments. Thankfully Vince Cable is holding Darling to account, but I would expect that the odds of Labour pulling back their opinion poll deficit have improved: this seemed to me a good enough Pre-Budget report to achieve that aim and quite a lot more.
Put simply: it looks like progressive taxation is back on the agenda, and that has to be good news.
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you might have noticed that most retailers are having early january sales. the real impact of the VAT change is to fund some of that discounting. Discounting that will no doubt extend throughout 2008 and result in an increase in small businesses going under.
you might also have noticed Darling admitting to a doubling of government debt, much larger than the supposed £20bn he is giving away – and that ignores the off balance sheet stuff. Interesting point of view that the Tories are being reckless against that background!
perhaps if you did not ignore the numbers you might take a different view?
The alternative to public debt is to allow the productive economy to be destroyed by private debt.
The Tories really need to catch up with the twentieth century, never mind the 21st. This balanced budget in a potential depression stuff was an honest error in the 1930s but to espouse it now in the year 2008 as if Keynes had never written a word is desperate stuff.
Osborne knows perfectly well that no government could be so irresponsible as to follow his advice, nor would he if he were in power. This is pure irresponsible political opportunism on his part.
Of course the Tories are right to attack Brown’s recklessness in indulging the City and presiding over the credit boom in the first place but the problem is New Labour screwed up by pursuing conservative policies. There is no reason to believe the Tories would have done any better had they been in power. Indeed had Osborne been Chancellor back in September we might have had total meltdown of the banking system in which case the government would eventually have been forced to nationalise the lot.
The only politician with credibility on the opposition benches is Vince Cable.