Budget likely to do little more than ‘tread water’, warns IFS

11 Mar 10
Economists are predicting a Budget of ‘masterly or not so masterly inactivity’ when Chancellor Alistair Darling puts his proposals to Parliament on March 24.
By Tash Shifrin

11 March 2010

Economists are predicting a Budget of ‘masterly or not so masterly inactivity’ when Chancellor Alistair Darling puts his proposals to Parliament on March 24.

The Budget will come less than a week after the public finance figures for February are released by the Office for National Statistics, with political attention focused on the deficit and public borrowing figures.

In a March 10 speech, Prime Minister Gordon Brown kept to the government’s line that spending could not be slashed in the short term because the fragile economy must be protected from the ‘dreadful storm’.

But he announced a freeze on senior managers’ pay across the public sector – a move that means rejecting some recommendations made by the independent pay review bodies. 

Brown said: ‘These measures, along with the new controls on pay which I announced in December, will save money immediately and by 2013/14 save more than £3bn.’

But Robert Chote, director of the Institute for Fiscal Studies, told Public Finance that with the general election imminent, he was expecting a cautious Budget of ‘masterly or not so masterly inactivity’.

Chote predicted: ‘The best bet is that we’re going to have a sort of treading water Budget. There’s no indication from the government of anything new about how quickly they will deal with the deficit or about changing the balance between tax rises and public spending cuts.’

There might be a ‘modest move’ in the direction of more tax increases, Chote said, but he was not expecting the chancellor to fill in the detail of departmental spending limits for the next few years.

In December’s Pre-Budget Report, Darling pledged to protect 95% of NHS spending, along with schools and police funding. But he refused to say when a Spending Review – covering funding for the rest of the public sector after 2010/11 – might be published. High spending on debt repayments and social security is expected to mean savage cuts across Whitehall departments.

Chote said the Budget was more likely to include details of expected billions of pounds of worth of efficiencies. It is also set to be accompanied by a report on the co-ordinated funding Total Place initiative.
Shadow chancellor George Osborne challenged Brown’s plans to reduce the deficit and stabilise the economy after ONS figures showed a 0.4% fall in production output between December and January.

Osborne said: ‘How telling that, minutes after he sat down, his speech was derailed by new statistics showing manufacturing shrinking.’

Unions responded angrily to the curb on managers’ pay, with senior civil service union Prospect noting ‘a glaring contrast’ with MPs’ 1.5% rise. It attacked the government’s failure to honour the third year of a three-year deal.

Ken Mulkearn, editor of the IDS Pay Report, told PF: ‘The last time we saw this level of restraint was the early 1990s.’

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