Britain's new directions
It was billed as a historic Budget, and in terms of its superlatives of borrowing, it didn't disappoint. But how will history judge today's astonishing reckoning?
It has the potential to use Britain's deep borrowing pockets to dig it out of recession swiftly and back onto a sustainable growth path - though it seems quite hard to find anyone who believes that other than people in or very near the UK Government.
Alternatively, it has the potential to turn the corner for the British economy and for Britain in terms of its place in the economic pecking order, burdened by debt for a generation, and turning its back on its reputation as a low tax magnet for the world's super-rich.
It has the potential - no it's stronger than that, it probably will turn the whole terms of the debate on the role of the state in Britain, and how much the public finances can sustain.
Because of that, the stresses and strains of much tighter public spending have the potential to drive a wedge between Westminster and Holyrood. That battle has been coming for some months, and today only served to ratchet it up. This could be crucial to shaping Scotland's constitutional future.
That's despite all the evidence from this Budget and from other data - including today's separate figures on Scotland's gross domestic product, unemployment and retail - that the British and Scottish economy are ever more intertwined.
But in the search for history-in-the-making, there's another facet of this Budget that might get overlooked in the political row, the taxation initiatives and the talk about jobs and greenery.
I was struck by Alistair Darling's explicit setting out of the ways the British economy needs to change. Necessarily, it can't rely so heavily on its finance sector, so he was setting out the areas in which he thinks it can develop deeper strengths, which are allied to his business support choices.
"In future," he said, "the sources of our growth will be more varied - and we need to ensure we play to our country's strengths.
"It will increasingly come from an expansion in investment by businesses in the industries of the future, such as low-carbon, advanced manufacturing and communications.
"These industries, together, are as important to the British economy as the financial services sector."
So in a Budget long on big, scary borrowing figures heading out towards the horizon, and short on other visions of the future, it was striking that at least this one part of the speech sets out a new direction for Britain.
Whether Alistair Darling will have a role in shaping that future from Downing Street... well, the election campaign starts here.
Hullo, I'm Douglas Fraser, and I'm business and economy editor at ³ÉÈË¿ìÊÖ Scotland. Welcome to my blog, where you can read my take on money matters, viewed from a Scottish perspective.
Comment number 1.
At 23rd Apr 2009, Wee-Scamp wrote:Actually, the industries of the future as Darling calls them have always been more important than financial services.
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Comment number 2.
At 23rd Apr 2009, minceandmealie wrote:I read that article three times and still couldn't figure out the point of it.
Far from being a historic budget, the striking thing about it is its bag-over- the-head Micawberish quality: carry on pretty much as before, with minor reductions in spending and minor tax increases, run up a mind bogglingly huge increase in the national debt, and hope that it will all work out because 'something will turn up'.
The increase in income tax for the tiny number of people who earn more than £150k per year (1% of UK taxpayers, and I guess less than 0.5% of Scottish taxpayers) is the politcal spin story designed to take attention away from the truly shocking deficit figures. The fact that Labour didn't care about this higher tax rate for the last twelve years shows of how little fiscal significance it is. It is just political show. The money raised from it will maybe buy a couple of pointelss nu-Trident submarines.
Realistically, there is not a great deal to choose between parties on this; all would run a large deficit. The real story is how did we get into this mess in the first place?
That comes back to financial regulation and government economic policy over the last decade. Putting the brakes on gradually and restricting the worst excesses of financial manipulation would have prevented the situation developing the way it has. It is an international issue, to be sure, but the two chief players in the sad story are Wall Street and the City, ie the USA and the UK. If those two countries had regulated properly, we wouldn't have had the budget tragedy we heard yesterday.
Who is to blame? In the USA, that was the blameworthy Bush administration, of course.
And in the UK, who was it that was in charge of financial regulation (or rather 'light touch' regulation and much deregulation)? Who created the FSA, removed the banking oversight responsibility from the Bank of England (and for good measure changed the rules on how building societies could raise funds and brought them under the FSA in 2004?)
Do you know who it is yet?
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Comment number 3.
At 25th Apr 2009, nottoonear wrote:#2
"I read that article three times and still couldn't figure out the point of it."
Thank you - I thought only I had difficulty finding it.
Indeed post #1 has, in one sentence, captured the true essence.
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