Saturday, February 16, 2008

Darling faces Budget date with destiny

Column published in the Newcastle Journal on 16 February 2008.


Early on in the lifetime of the Labour government – in the days when it could make such boasts without inviting ridicule – Gordon Brown once referred to himself as “the Guardian of the People’s Money.”

Indeed, such was the rigour with which Mr Brown managed the public finances in his “Iron Chancellor” phase, that there was a time when such a lofty claim could be taken semi-seriously.

A decade on, however, the administration he now heads cannot even ensure that £2.8m worth of the People’s Money ends up going to the right Newcastle.

Was this simply an administrative cock-up of the kind that happens to all governments from time to time? Or is it emblematic of a wider malaise at the heart of this particular one?

Either way, the past week has seen the mounting discontent about the performance of the Brown administration converging around his successor at the Treasury, Alistair Darling.

Every so often, a negative buzz goes round a particular politician. At the moment, it’s happening to the Chancellor.

On the face of it, the reasons for this are not hard to fathom – his handling of the Northern Rock crisis coupled with the double U-turn over the taxing of “non-doms” and the reforms to capital gains tax.

But allied to this is a growing feeling at Westminster that the Brown-Darling partnership is not doing the business for Labour, and that one or other of them will, at some stage, have to make way.

We’ll leave Northern Rock to one side for now. Suffice to say that while Mr Darling’s initial handling of last autumn’s run on the bank was praised, the continuing uncertainty over its future has not shown him in his best light.

I’ll be generous to Mr Darling and say that, thus far, the Rock crisis represents a no-score draw for the government. It could yet go either way.

The decisions to backtrack on two of the key elements of his October pre-Budget report in response to pressure from the business world are, however, less easy to gloss over.

Over the past fortnight, Mr Darling has caved in to demands to water-down his plans to standardise capital gains tax at 18pc, and also to close tax loopholes for wealthy “non-domiciled” businessmen whose earnings are held offshore.

The moves are all the more embarrassing because when Mr Darling first unveiled his pre-Budget report last October it was widely criticised as having been put together on the hoof.

It came days after the Tories had rocked the government with the announcement of their plan to slash inheritance tax for all estates over £1m.

The proposed introduction of a flat rate annual tax levied on all 650,000 “non-doms,” which had also been advocated by the Tories, was conceived as a means of paying for the tax cut.

But if such wholesale purloining of the opposition’s ideas seemed politically inept at the time, the fact that Mr Darling has now had to think again makes it look doubly so.

Indeed, as things stand, the Tories will be going into the next election pledged to tax “non-doms” at five times the rate now proposed by Labour – although there has to be a question mark over whether their plans are any more workable than Mr Darling’s.

Once again, it poses the question whether voters of a leftish inclination are now better off supporting a right-wing party that leans to the left over a centrist one that leans increasingly to the right - but that is a question for another day.

What this week’s moves by Mr Darling really demonstrate is a catastrophic loss of confidence by the government in their own values of social justice and fairness.

As one left-leaning commentator put it: “The entire Cabinet should have been barnstorming through the studios denouncing the sheer naked greed of the rich, rallying support for fair taxes paid fairly by all.”

Set against that backdrop, it is not surprising that even though Parliament has been in recess this week, a whispering campaign has begun against the Chancellor.

It was kicked off by an unnamed Labour MP who was quoted in a Sunday newspaper as saying that the Schools Secretary, Ed Balls, would do a better job at the Treasury.

Actually, there are some MPs who think this anonymous colleague was in fact Mr Balls himself, but I can’t believe he would be that daft.

Neither, frankly, can I believe there are many Labour MPs who see him as the answer, given that he suffers from the same unfortunate tendency to spout economic facts at us that afflicts the Prime Minister.

What Mr Brown really needs at the Treasury is someone who complements his style rather than duplicates it.

Charles Clarke could have been a contender – but he has this week ruled himself out of any future reshuffle equations with yet another intemperate attack on Mr Brown that just gives the Tories more ammunition.

It seems clear to me that had Mr Brown appointed Jack Straw or David Miliband to the Chancellorship last June, his government would now look stronger.

But to make those changes now would not only seem like a panic measure, it would be an admission that the Prime Minister got the most crucial appointment of his premiership wrong.

In any case, there comes a point in the lifetime of any government where reshuffles become no more than a meaningless game of musical chairs, and, for New Labour, this point has probably long since passed.

The challenge for Mr Darling now is less to keep his job than to get through to Budget Day on March 12 without having to dismantle any more of his pre-Budget proposals.

Next in the business lobby’s firing line is the proposed 2p increase in petrol duty – something for which there is a clear environmental as well as an economic case.

Whether ministers are now prepared to make that case will show if this bruised and battered administration retains any shred of self-belief.

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