Events | 2009.12.08
Alastair Darling could help safeguard public services
The pre-budget report is an opportunity for raising revenue from the wealthy to foster a more level society and protect services
Like a work of modern art, a pre-budget report is whatever you make of it. In preparing an actual budget, chancellors are constrained by fusty tradition (think of the flashing of Gladstone\'s battered red box) and by the obligation to settle the books for the year ahead. The pre-budget, by contrast, did not even exist before 1997, and its official purpose is to "encourage debate on the proposals under consideration", a flexible formula for allowing the Treasury to do just as little – or just as much – as it wants.
The chancellorial hand is, of course, constrained by the public finances – especially in the light of the plan to promise in law that half of the swollen overdraft will be paid off over four years. Within the small print of that self-imposed stricture, however, there is a modicum of wiggle room to ease the purse strings over the coming months. Poor economic news could provide the rationale, and the looming general election would – in ordinary times – be expected to provide an overpowering political motive for scraping a little cheer from the base of the barrel.
But these are not ordinary times, and the public is too gloomy to be impressed by any short-term showering of funds. When Alistair Darling stands up today, he will emphasise what he must extract from society over what he can afford to spend on it. I don\'t expect too much real pain for middle England so soon before polling day, and we may even see targeted support for the low-paid and struggling industries. Public servants, however, should expect no Christmas cheer: the weekend trails in the media were all about carefully targeted cuts – for example, to NHS IT – and the forcible redeployment of civil servants from London to cheaper locations, before Monday\'s signal from the prime minister that overpaid state employees were to be named and shamed.
Most unusually in a pre-election announcement, Darling seems intent on ensuring that the headlines are all about tax. It was always the great New Labour taboo, but its populist potential has belatedly been discovered. The most obvious case is that of the hated financiers, who are likely to face either a windfall tariff or a bonus levy. It may be arbitrary, it might be scuppered by plutocrats fleeing abroad, but the public is justifiably sick of bankrolling the bankers, and now deserves its revenge.
With a £175bn deficit, the few hundred million raised from the money men will be primarily symbolic. The more interesting question is whether the credit crunch has prepared the political ground for a wider redistribution from those at the top of the pile. The feeling at Westminster is that Gordon Brown\'s "playing fields of Eton" quip against David Cameron played well, and though Darling is no instinctive class warrior he has plenty of options for making the rich pay a fairer share. There is a decent economic case, for example, for punishing super-sized pension pots, as well as getting tougher on both property and capital gains. Such moves could belatedly repair Labour\'s poor record on inequality – the determined efforts to help the bottom catch up at last being supported, instead of undermined, by action at the top end.
As well as directly fostering a more level society, raising revenue from the rich could help to safeguard public services through the fiscal dark age that will begin the day after Britain goes to the polls. Wartime experience suggests high top tax rates raised in an emergency can persist for many a subsequent year, and thereby eventually raise serious money. The protective effect on services will be all the greater if particular levies are linked to particular services – if, for instance, ministers shelved the planned cut in inheritance tax in the name of protecting the school buildings programme, then the opposition may feel it would have to fall into line.
Progressive opportunity lurks just around the corner during the most taxing times.
Tom Clark is the Guardian\'s leader writer on social affairs.
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http://www.guardian.co.uk/society/joepub[...]pre-budget-tax-public-services
