Magazine article The Spectator

No Growth with Gloomy Gordon

Magazine article The Spectator

No Growth with Gloomy Gordon

Article excerpt

LAST WEEK I attended the historic first ever pre-Budget report by the Chancellor to the House of Commons. It was the first ever and it will also be the last. It reminded me of the inaugural annual dinner of one of those clubs that never meets again.

Next November, Gordon Brown will deliver a statement on his first public spending round and deliver his Budget in the following March. I expect that I will be the only chancellor who delivered all his budgets in November.

Gordon has always had difficulty in deciding what this week's statement was for. At first it was going to be a consultative Green Budget allowing proper discussion of proposed tax changes in advance of the March Budget and the Finance Bill. Then it was to be a detailed statement of a new lOp income tax band, changes to the taxation of company cars and full details of welfare to work. In the end - at a very late stage, I suspect - it was turned into a House of Commons occasion for Gordon to demonstrate his domination of the government and to offer some populist goodies to Labour backbenchers threatening to rebel over cuts in lone-parent benefits.

It is easier to follow these things nowadays because of the openness with which Gordon Brown's spin doctors now brief selected friendly journalists in advance about the Chancellor's every intention. After the EMU row gave too much publicity to the Red Lion, I am told that the briefings have moved to the Two Chairmen. This time they did not disturb the markets, but the technique remains the same.

The idea of a consultative Green Budget seemed such a good idea in the summer, but it bit the dust a few weeks ago. If tax changes are pre-announced every sensible taxpayer rushes to anticipate and avoid them. The only remedy is to backdate them to the date of the preannouncement and Gordon did not want to face that row. The pre-announcement of big changes also gives every heavyweight lobby the chance to head it off. Gordon did not want the oil industry to spend the winter telling Scottish MPs how changes to North Sea oil tax would bring ruin to their constituencies.

There is also the problem that Gordon does not know what to do about some taxes. He has flagged up tough intentions on inheritance and capital gains but has no ideas that will raise any significant revenue or please anyone but a handful of very rich people. He has said he will abolish PEPs and Tessas because they were Tory ideas. He has no notion what will be the incentives in the Individual Savings Accounts which will replace them. His promised consultative document on ISAs will resemble the document on `stakeholder pensions, and will ask if anyone has got any bright ideas.

He had to abolish Advance Corporation Tax because he had not thought through the abolition of the Foreign Income Dividend scheme last July. He did make it sound good by lowering the rate of corporation tax by one per cent. It took 12 hours for everyone to realise that he has taken another 5 billion out of corporate cash flows over the next five years.

All this on top of the July budget left the Treasury with money coming out of its ears. Turning to his difficult backbenchers, Gordon generously gave a modest amount of it away to the low-paid, pensioners and single mothers.

My wife points out that she will be 60 in a little over three years' time and we will be a pensioner household. During the later years of this Parliament I will be one of many MPs getting help with my fuel bills. …

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