Curiouser and curiouser, by Mike Thatcher

25 Mar 10
Mike Thatcher | Listening to Chancellor Alistair Darling’s reassuring tones in this week’s Budget, one could easily believe that the crisis is over.

Listening to Chancellor Alistair Darling’s reassuring tones in this week’s Budget, one could easily believe that the crisis is over.

The debt forecast has improved (by £100bn over six years), growth is returning, and both unemployment and inflation are falling. His speech implied that unless you’re a banker, cider drinker or resident of Belize, you can rest easy.

Darling even managed to pull a few pre-Easter rabbits from his Budget box. First-time buyers get a two-year holiday from stamp duty for properties below £250,000, while £2.5bn has been found for a one-off growth package.
Having predicted a ‘workmanlike’ Budget with no giveaways, Darling produced something very different. He promised pot hole-free roads, 20,000 extra university places and a green investment bank.

There was no mention, of course, of the pain to come. In this Alice in Wonderland world, huge cuts in public spending will appear as if by magic. It’s jam today, but no mention of tomorrow’s starvation diet.

The deficit will be halved over four years (equating to a reduction of £89bn) but apart from efficiency savings, curbs on pay and pensions and relocating civil servants, we know not how.

Darling is a politician who means what he says – he has been lauded for his early assessment that the economic times are ‘arguably the worst they have been for 60 years’. But what he doesn’t say is equally revealing.

A lack of honesty should perhaps be expected six weeks from a likely election date. But, as KPMG warned this week, public servants should not be lulled into a false sense of security.

Non-protected areas face cuts approaching 20% over the three years from 2011. Politicians and economists can argue about how quickly the cuts should begin (see cover feature on pages 20–23) but there is no escaping them.

Whole programmes will need to be axed, while those that survive will inevitably struggle to maintain quality levels.

The waiting game cannot go on for much longer. If the Tories win the election, we can expect an emergency Budget within 50 days; if Labour clings on, then the autumn will bring a Comprehensive Spending Review.

The details, when they come, will be unpalatable. But, at least, whoever is chancellor come May 7 can say what he means as well as meaning what he says.

Public Finance will be taking an Easter break in the week ahead, and will next be published on April 9

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