Apart from a Union boss spouting class war and a Greenie who wants to save the planet from a non-existent threat rather than save Britain from a real one, the general tone of comments here is downbeat when it isn’t actually scornful.
Christina
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FINANCIAL TIMES 9.12.09
Instant reaction to the pre-Budget report
POLITICAL REACTION:
George Osborne, shadow chancellor: “All the efforts they (Labour) made to persuade the country they are for enterprise and aspiration, all that is gone. Instead, they have erected a sign over the country saying ‘closed to enterprise and wealth creation’.
“All for the sake of narrow political dividing lines. Instead of telling the country that we are all in this together, Labour now pretend they can solve our problems by setting one part of the country against another.”
ON TAXING BANK BONUSES:
Tony Woodley, Unite union: “The tax on bankers is welcome and must now mark the beginnings of a fairer tax regime. The recession is not over even if the bankers that caused the crisis act like it is.
“The chancellor must resist scaremongering from the city over ‘brain drain’. With unemployment set to rise, this is a time to put jobs and families first. Public sector workers should not have to pay the price for the economic crisis caused by casino capitalism. We oppose a cap on public sector pay but the Tories would freeze pay now and make brutal cuts to public services.
David Buik, BGC Partners: “I think it was a nasty, pernicious and vituperative tax on the bank bonuses. It was clever because it is payable by the bank, rather than the individual. The stock market reacted quite well, but it still left a huge doubt in the minds of many international investment banks as to whether they should stay in the United Kingdom. They say it is a one-off, but who can tell?”
Rod Roman, Ernst & Young: “Despite the chancellor’s protestations, changing the tax on bonuses to banking staff will be seen as a windfall tax on banking profits. This increases the costs of those banks operating in the UK. Windfall taxes of this nature are dangerous because they can become an expectation of businesses. Those investing in the UK will have to double guess the actions of future governments and in this situation, low tax rates will no longer attract companies to the UK.”
ON RAISING NI CONTRIBUTIONS:
Richard Lambert, director-general of the CBI employers’ group: “The chancellor has made a serious mistake imposing an extra jobs tax at a time when the economic recovery will still be fragile. Increasing the National Insurance contribution will hold back job creation and growth.
“He has also missed the opportunity to increase the UK’s credibility by reducing the public deficit earlier. We are no clearer today as to how the government plans to reduce public expenditure.
“We applaud the government’s courage in beginning to tackle the thorny issues of public sector pay and pensions. There is also an encouraging package to support companies as they seek to exploit new low-carbon opportunities.
“A headline-grabbing tax on bankers’ bonuses may have populist appeal, but the government needs to take care not to put the UK’s financial services sector at a comparative disadvantage internationally. The threat of an exodus of talent is real.”
ON REDUCING THE DEFICIT:
Miles Templeman, Institute of Directors: “The key theme of this year’s PBR is prudence postponed. There must be serious doubt as to whether the government has any commitment to reducing the deficit. Yet again we see more of the same old spend, spend, spend story. We thought that chapter of the book was over but it seems the chancellor has ordered a reprint.
“The government is right to focus on reducing unemployment but the additional National Insurance rise will directly put jobs at risk and make it even more difficult for businesses to rehire once the recovery starts. A further tax on jobs at a time like this is madness.”
Alan Downey, KPMG: “We have been waiting for an announcement on where the axe will fall but it is clear that at this stage in the electoral cycle the chancellor’s weapon of choice is a butter knife rather than an axe. Those who were expecting a plan for reducing public expenditure will be disappointed.
“On the contrary, the chancellor announced a significant number of new spending commitments plus a guarantee to increase spending in real terms on health and education and to maintain spending on the police.”
George Buckley, Deutsche Bank: “The [revised borrowing figures] haven’t been revised very much. It doesn’t look like they’ve made much change at all. It’s fiscally neutral and it seems like they haven’t done a great deal in terms of changing the overall fiscal stance.
“[On the GDP forecasts], they haven’t changed them from 2010 onwards, it’s only 2009 which of course they did have to change because we saw some very signficantly weak numbers.”
Jonathan Loynes, Capital Economics: “First impressions of the UK pre-Budget report is that it is largely a non-event as far as the economy and the fiscal position is concerned.
“There are micro-measures to support the housing and labour markets, paid for by modest tax increases including the widely expected tax on bankers’ bonuses, a freeze on the inheritance tax threshold, and more National Insurance increases. But they all cancel each other out in terms of revenue.
“With the profile for public borrowing virtually identical to that presented in the April Budget, the overall package looks to be pretty much neutral. In other words, the chancellor has done little either to support the economy in the near-term or to move the public finances back to a more sustainable position over the medium-term.”
ON RETURN TO 17.5 PER CENT VAT:
Greg Hodge, Planet Retail: “It’s good news they haven’t gone further [on raising value-added tax], or extended it to food. But I think it will hit spending more than people think. I think there’s the notion that when things go down they (consumers) don’t notice that much, but when it’s taken away from them they will get quite upset.
“It could change spending patterns between now and January with people bulking up on big-ticket items and retailers using it to their advantage. So we should see less of the discounting we saw last year.”
• ON TACKLING CLIMATE CHANGE
Ed Matthew, Friends of the Earth: “With the future of the planet hanging in the balance in Copenhagen, the pre-Budget report was a golden opportunity for the chancellor to demonstrate genuine global leadership in developing a low-carbon future – but he has chosen to be timid when he needed to be bold.
“Some of Alistair Darling’s eco-initiatives are certainly welcome, but the economy doesn’t need green tinkering – it needs a complete low carbon overhaul.”
A selection of non-government comments on the PBR (as gathered via Political Home) up to 16.15 hrs
Christina
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FIRST COMMENTS ON PBR 9.12.09
- in brief!
13:22- - - Osborne: "We were promised a pre-budget report and what we got was a pre-election report - they have lost all the moral authority to government today.
Osborne says Darling is doubling the national debt from where it is today to £1.4tr - £23,000 for every child born today
He says Darling is "achieving that previously impossible trick of ringfencing a black hole".
13:38 Cable on Darling's bank bonus tax: "How will he stop the banks converting their bonuses into basic salary?
"The economy is now being rebuilt on sand. The only real sign of recovery we have are rising house prices and booming bank profits, at a time when industry is continuing to decline."
"None of this increase in taxation is gong to be used to pay down the borrowing requirement".
He questions the growth forcast: "Surely we can't operate on the basis of a single line forecast based entirely on optimism and very little else."
14:13 The Taxpayers Alliance issue their response to the PBR: "It is unbelievable and completely counterproductive that the Chancellor has decided to increase National Insurance whilst talking about the need for job creation and economic recovery. This is a huge tax hike on jobs, that will put many more people out of work and condemn the unemployed to continued joblessness.
"We are in a dire state economically and fiscally, but this Pre Budget Report dodges all of the difficult questions that must be answered. I fear that Alistair Darling has just lengthened the recession and deepened the suffering of British taxpayers.”
14:54 Philip Hammond tells Sky News that the Conservatives would “get the deficit down faster, go further than Labour have today”
15:12 Speaking to the BBC, Mr Hammond warns that the pre-budget report will cost famiies and average over £370.
15:31 Lord Lamont tells Sky News that the pre-budget has simply postponed the "day of reckoning" for the economy.
"“I thought it was very political - I was hoping we would get more steps to reduce the deficit,” he says
“The day of reckoning is only postponed and the cheque is in the post."
He also warns that 2010 could see the economy still contracting.
15:33 Vince Cable claims that there at half a dozen "fairly obvious" ways for bankers to get round the new tax on their bonuses.
"This doesn't send any message to the banks at all the bankers are smart enough to realise that they don't have to pay this tax," he tells the BBC
Conservative Home naturally in its brief response to the PBR is political in tone but with sound economics behind it.
The Telegraph regular commentators are - er - unhappy!
Christina
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CONSERVATIVE HOME 9.12.09
How many ducks did you spot?
George Osborne got it right. This was the pre-election report of a government ducking the hard choices.
Over the next six years the British state will borrow £789bn. The national debt will treble. We heard nothing from Labour on how they will deal with this national crisis.
Despite falling prices the Chancellor promised pensioners a 2.5% cash increase. That's a 4% real terms increase. That's not only a ducked hard choice but a transparent and unaffordable bribe.
Darling ducked an apology for getting his forecasts so wrong. A year ago he said the economy would shrink by 0.75% to 1.25%. It's actually due to shrink by 4.75%. Last year he forecast that this year's deficit would be £78bn. It's actually £178bn. Can you believe a word he says?
Darling didn't tell us how he'd cut spending after the coming [election] year. He's actually spending £7bn MORE this year. Crazy duck.
In the more immediate term he talked about the departmental budgets he will increase but kept silent about those he will cut.
Darling didn't tell us how he hoped to fashion a 3.5% growth rate but based his estimates of future budget deficits on that optimistic level of growth.
It's difficult to see how the economy is going to create more jobs given another increase in National Insurance contributions. It's difficult to see how the economy is going to create jobs given the extra burden he imposed on 40p income taxpayers by failing to link the threshold to prices.
Tim Montgomerie at 3.40pm
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TELEGRAPH Blogs 9.12.09
Pre-Budget report: this Government's air of unreality deepens
By Jeremy Warner
The Chancellor had been set the task of both keeping the markets on side (given the amount he has to borrow, he needs their support) and, with nothing to give away (to the contrary, he needs to commit to big savings), keeping the electorate as sweet as possible. Did he succeed?
The second half of this question is easier to answer than the first. The Chancellor’s statement was stuffed full of political messages.The big numbers on public borrowing for the next four years haven’t been changed very much from what the Chancellor set out in the last Budget. The Chancellor, as previously announced, promises to halve the deficit in four years. But the components that make up these numbers have been substantially chopped and changed about. In particular, the Chancellor aims to raise more from taxation and cut spending by less.
There were never going to be any tax giveaways in this budget – unless you count the ridiculous cut in bingo duty (more support for hard working families, apparently). [Forget this one - it turns out merely to be a correction! -cs] Instead, it was always going to be about saving as much of Labour’s public spending binge as possible. By altering the balance in the coming fiscal consolidation between spending cuts and tax rises, the Chancellor helps achieve this objective. The tax burden is to rise, but entitlements (pensions and other benefits) are to keep rising in line with inflation. Let’s be clear.
There is still going to be a squeeze on departmental spending almost without precedent in post war Britain. But it is not going to be quite as bad under these plans as before.
The big tax measures are the additional 0.5 per cent on national insurance rates from 2012 (which raises approximately £4.5bn a year from 2011/12 onwards), the freezing of the 40 per cent tax threshold (which will yield an extra £400m a year by 2012/13, a raft of anti-avoidance measures, and the super tax on banking bonuses, worth a one off £500m to the Treasury.
On the spending side, the Chancellor was predictably and deliberately vague. The only additional measures I could spot were that the Government is going to attempt to freeze public sector pay increases at 1 per cent for two years from the year after next, and make public sector workers contribute more to their pensions. In addition to a number of other minor savings on IT projects, Lord Turner’s plans for nationwide pension savings accounts also seem to be toast. The roll out is to be delayed.
But the big point is that other than the windfall tax on bank bonuses, the whole thing is pain delayed. [Pain delayed is pain massively increased -cs] Hiding behind the now laboured mantra that he doesn’t want to wreck the recovery by withdrawing fiscal support too quickly, the Chancellor delivers the intensely political message that all the belt tightening can be postponed until well after the next election.
In the meantime, the public sector is still hiring in oblvious disregard for the calamitous size of the national debt. It’s an odd kind of pre-election budget that gives away nothing at all in terms of bribing the electorate with its own money. Rather, the Chancellor seeks to differentiate himself from the Opposition by insinuating that he will squeeze frontline public spending by less, and in any case, not for now.
So on to the second part of the opening question. Will the markets weather it? The judgement of the gilts market yesterday, where gilt yields fell, was positive. It’s hard to work out quite why, unless it be relief that the Chancellor wasn’t seeking to borrow even more. But as I’ve written before, there is a strong sense of unreality about anything the Government announces right now, since everyone expects it to be largely rewritten after the election in six months time. The Government could have announced almost anything and the markets would have ignored it. It is what happens after the hunt for votes is over that’s important.
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Pre-Budget report: Growth rhetoric and a stealth tax on jobs, how Old Labour
By Damian Reece
Ahead of a general election, and in the midst of the worst recession for 70 years, the Chancellor was never going to grasp the nettle. But he did leave us stung with tax rises to come.
Far from being a Pre-Budget Report to stimulate growth, this statement was a tax on jobs through Alistair Darling’s pernicious use of national insurance to raise revenue in future.
To give you a feel for high tax Britain, if you earn between £100,000 and £113,000, or if you aspire to earn that much, your marginal rate of tax will be 62pc from April 2011. That feels pretty Old Labour to me.
Today’s statement was as much about delivering the right result for Labour at next year’s general election as delivering the right result for the economy.
It was the predictable fudge. There was no credible plan for tackling the fiscal deficit of £178bn - just vague promises and we’ll continue with our suicidal spending plans this year.
If you believe Darling’s promise to halve the deficit by 2014 then there will have to be lots of pain in future but not until after the voters have gone to the polls. I suspect the electorate will see through this ruse.
The truth is Darling’s delaying tactics will continue to hurt the economy, storing up more problems for the next government. He has done nothing to undo the damage wrought by 12 years of mismanagement
Gilts opened down this morning but rallied during Darling’s speech when he insisted that growth would resume next year, implying the parlous state of the public finances won’t be getting materially worse.
Personally, I’ve given up believing Treasury forecasts because they’re so wrong, so often. Predictably, today saw short term political considerations usurp long term economic ones. It was another missed opportunity and we’re running out of chances fast.
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Merely my personal reaction.
The package didn't make any impression that Darling had the slightest concept that matters are extremely serious and urgent. Or if he thought they were he was not letting on. He will, I presdume from this, present a budget full of false optimism in February or March and another (should Brown and he get away with it ) after an earlyish election containing the tough stuff.
The bonus capping is stupid and vindictive and will achieve nothing except to disincentivise the top-fliers on whom we rely to rebuild our economy. He claims that his one-off tax (one-off? I wonder?) will raise £500m when the savings we should be looking at should beat least £50 BILLION - 100 times as much! He also forgot to mention that if this 50% tax is to raise that amount the total would have been £1 billion on which the recipients would have paid income tax @ about 53% . The man can't think straight.
The NI increase is a straight blow at the struggling middle classes and is clearly political in nature
Glad he is tacking feather-bedding state pensions. Their exemption from the reality of the rest of the pension world for so long has been a scandal.
Overall any savings mentioned today rely on the figures not the words! Any cuts are in MILLIONS when BILLIONS are needed.
A basis for an election - ,YES. A blueprint to save Britain - NO.
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I wonder if Darling or Brown noticed today that as a result of GREECE losing its AAA rating borrowing costs have risen widely in Europe today including here in Britain. So from today more of our taxes will go on servicing those debts that Brown has so imprudently built up.
Christina
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