Lansons Conversations

Pre Budget Report 2009 – Lansons Public Affairs Briefing

Today’s Pre Budget Report was billed as the most important in years. This should not have been hyperbole, with the budget deficit reaching new heights, the UK’s AAA credit rating at its most precarious state, strained relations between the Government and City and the polling gap between the two parties slimming. But while there is a lot riding on this year’s Pre Budget Report, the City and politicians assessed each section of Chancellor’s speech on the basis of what really counted and what could be ditched or revised by a new Government next year. Chancellor Darling’s reputation has been rehabilitated almost as quickly as he was rubbished by Number 10 as the storm clouds of recession arrived. By common consensus he has had a good recession. His speech was peppered with overt pre-election messaging. It was, yet again, a Budget for fairness and opportunity for all, though the latter point had more edge this year given the Westminster village appeal of Labour’s new ‘Eton strategy’ – Brown returned to the theme during Prime Minister’s Questions today. But while there were announcements on benefits, youth unemployment, pensions, even a reduced Bingo tax, which ought to appeal, Labour’s core vote didn’t emerge unscathed from the PBR either. Darling appears to have held off Gordon Brown’s reported demands for a more ‘political’ Budget. Sources close to Darling had been suggesting he recognised his responsibilities to the economy and the country. So, public sector workers other than the armed forces were hit by a cap on pay rises. If the Treasury predictions for inflation are correct, six million public workers will suffer a real-terms cut in pay in both 2011 and 2012. Equally, the unexpected national insurance rise is hardly the stuff of a traditional pre election give away in that it will hit so many. Rather, this was about reality – his spending commitments elsewhere demanded the rise, it was about delayed pain – not taking effect until after the election, and about challenging the Tories to dare to suggest they would repeal the measure. Ring fencing of funds for schools, police, health, targeting the better off highlight the blueprint for Labour’s planned manifesto and the themes for the campaign to come but whatever Labour might throw at the Tories during the election campaign, it is nothing like as bad as the pained inheritance George Osborne may inherit. Darling was never going to be Santa Clause today but he did leave an unwanted present for George Osborne – a raft of delayed pain to hit the voters shortly into Osborne’s presumed Chancellorship. For a comprehensive analysis on all the key measures and their impact on the financial services sector please click here.