Thursday, 22 March 2007

Of Browns and Budgets..

What are we to make of this week's Budget ? The press has been thrown into a frenzy and the Conservative response has been predictable. A more rational analysis of the Budget shows it to be a clever "political" package which has been crafted to maximize the discomfort of the Conservatives as much as to promote the economic stability of the country.

Chancellors of the Exchequer fall into two categories. On the one hand, you have the "fiscal" men - people for whom the post represents the limit of their political career and ambition and for whom the financial stewardship of the country is the primary responsibility and objective. In to this category fell man like Cripps, Barber and Lawson. These are professional financial men and their policies were guided by that.

The second category of Chancellor is the "political" man. For these men, No.11 Downing Street is the gateway to the top job next door. Those who aspired to the Premiership from here include Callaghan, Jenkins, Clarke and of course Gordon Brown. Their fortunes are of course inextricably tied those of their neighbour but ambition remains. In an environment where the Chancellor, Foreign Secretary and Home Secretary are usually the main candidates to replace the Prime Minister, the Budget is the opportunity for the Chancellor to present himself as the best option.

So why do I think Brown has been clever this year ? The key is not to look at who stands to lose but who stands to win and where they will be found. Much has been made of how those earning under some £18,000 pa will lose out and rightly so but these aren't going to be found around London or the South-East. The "winners" are those between £18,000 and roughly £40,000. I fall into that category, so does Mrs Stodge and so do most of the people I know. Many of these people don't drive either. My guess is that there are many such "winners" in and around London and the suburbs and this is the whole point.

The Conservative recovery since 2002 has been strongest in suburban London and the south-east. The strongest increase in Tory vote share in 2005 was in London and the surrounding areas and local election results since 2002 have shown a growing Conservative ascendency across the region. There are a number of marginal Labour seats in London and elsewhere across the south-east. Brown knows that the next election could be won and lost in this area and the Tories know it too. If Labour are to be deprived of its majority and the Lib Dems to be forced back, London and the South-East is the place and the battleground.

Gordon Brown has produced a Budget designed for prospective Conservative voters - those who voted Labour in 1997 and 2001 but have drifted back to the Tories since. It is a Budget designed to win them back for Labour and secure the suburban marginals. As with so much else yesterday, the Budget is a political act whose main aim was to put the Conservatives on the backfoot and that appears to have succeeded.

Will that produce a turn of the tide in the polls ? Perhaps not immediately but the aim may be for the transition from Blair to Brown to produce a significant Labour recovery. No doubt Brown will, once Prime Minister, be seeking to ensure that the 2008 and 2009 Budgets are similarly positioned and for those Tories who cry foul, this is exactly what Nigel Lawson used to do in the mid 1980s with tax cuts immediately prior to an election. I believe Brown still wants to go to the country in May 2009 on the back of two more "popular" Budgets.

For David Cameron, whose response to the Budget was pretty good considering it's arguably the most difficult Parliamentary task for the Leader of the Opposition, this is the start of the true test. Up to now, Cameron has had it easy but Brown will be a formidable and wily opponent. It will be a real test of Cameron (and Osborne's mettle) to see if they can come back against what will now doubtless be the Labour (and Lib Dem) jibe that the Conservatives are now the party of higher taxes.


Innocent Abroad said...

I'd largely agree with you - but what you might have said is that this budget represents the end of Labour's - admittedly by now extremely threadbare - position as the party of the underdog and with any sort of commitment to social justice.

Its only raison d'etre is the possession of power, and once it loses power, it will fall apart. What new anti-TU legislation is Cameron proposing? When did you least hear the Tory press banging on about over-powerful unions (other than the London Evening Standard's quaint belief that Tube strike ballots somehow threaten the capital's quality of life)?

After Labour's defeat, more Unions will disaffiliate. The party will struggle to fund its first election in opposition, whether that's the time after next or the time after that.

andy cooke said...

Sharp point, stodge - and so obvious once it's pointed out! Labour's worst drops have been in London, and it absolutely has to hold them to form a majority next time. Gordon's not playing to be leader of a minority party after the next election; he's playing to turn around their fortunes and win properly. So it's a London voters Budget.

The deepening of the benefits trap is worrying - 70% marginal rates going way up the scale now. I do not like Tax Credits - complex, heavy administration, heavy means-testing, poor take up rates, administrative cock-ups ... there has to be a way of simplifying things.

For example, why not get rid of the Family Credit element of Tax Credits (the £545 paid to everyone with children up to about £60k) and simply increase Child Benefit for the first kid by £10.48 a week. I know that there would be a few families that would get it that don't now (Let's see - 4 million or so higher tax payers at 45k+; of these less than half would be in top rate if it had grown with earnings to about 52k, so about a third of top-rate tax payers on 60k+ ... a non-negligible amount of those won't have kids under 16 (those with kids over 16 or no kids at all); say half. So about 600,000 would receive £545/year - £327 million extra out).

How much would be saved by not sending out forms every year to both partners of families over £27k/year? (About 8-10 million families, so 16-20 million forms (my wife and I receive separate forms in separate envelopes) and the administration to process them - plus God knows how many trees saved.)

Benedict White said...

Stodge, correct me if I am wrong, but what you are say is that Brown has blown out everybody but a specific segment of the population?

If so, I agree. He has really screwed the low paid, and bumped up the clawback as well!

loadofoldstodge said...

First, thanks for the comments everyone. I do think some of the comment over on has become hysterical and lacking in any form of rational analysis.

Benedict, I don't disagree that significant elements are going to be worse off after THIS Budget but I think you and other Tory activists are taking a far too short-term view. This Budget cannot be seen in isolation. Mike Smithson may have his doubts about Brown but the fact is, as Nick Palmer always says, that Brown is going to be the next Labour leader and Prime Minister.

This Budget (and the next two) are the key elements toward winning the 2009 General Election. As John Major knew, losing hundreds of local Council seats is bad but not terminal - he lost over 2,000 in a single night in 1995 -.

This Budget was also about forcing both the Tories and Lib Dems into policy corners on taxation and spending and the next two Budgets will be designed to make it very difficult for Osborne or Cable to convincingly sell a tax cutting package.

I also think Brown expects a downward move in interest rates before 2009 (three rises in a year have, I think, been a big factor in disillusionment with Labour). IF Brown can cut taxes on the back of declining interest rates, he may yet persuade the suburban voter like me that he's the man for the job.