Corin-Taylor

The opening remarks of Alistair Darling’s Budget speech showed that the Chancellor is well aware of Britain and the world economy’s ongoing economic woes.  How troubling and disappointing, then, that his first Red Book will only make things worse.  There are four key failings.  First, the Budget raised taxes yet again, the very worst thing to do at the start of an economic downturn.  £1.5 billion extra will be raised from alcohol over the next three years, £1.6 billion from cars (even with the delayed fuel duty rise), and £1.7 billion extra from businesses, much of it in the familiar form of anti-avoidance measures.  Second, it failed to modify previously announced tax rises.

The discussion around Alistair Darling’s first Budget is likely to be dominated by immediate worries, such as non-dom taxation, capital gains tax, the rising budget deficit, Northern Rock, and the impact of the credit crunch on economic growth.  These are all issues of paramount concern.  But it’s important not to forget the negative longer-term effects of fiscal policy in recent years. Public spending has surged since 2000.  On the OECD numbers, it has increased from 37.5 per cent of GDP in 2000 to 45 per cent last year – an increase unprecedented during a peacetime period of steady economic growth.  In 2000, Britain’s public spending as a share of national income was below the OECD average.  It is now 4.5 percentage points higher.