Darling plans top tax rate of 45%

Published on 23/11/2008 20:56

FOR Alistair Darling, it is the challenge of a lifetime. Even his friends admit his downbeat style and monotone delivery are unlikely to make this afternoon's Pre-Budget Report in the Commons great political theatre.

Yet interest in the speech is feverish and all eyes will be on the Chancellor as he tries to pull off arguably the biggest financial conjuring-trick in British political history. He needs to convince the public to go on a spending spree just as the economy is about to enter recession, while reassuring the money markets that he is not gambling too heavily on his country's future.

In delivering his Pre-Budget Report, the Chancellor must attempt to instil confidence – at a time of soaring unemployment and plunging house prices – by unveiling an expected cut in VAT and tax freezes to kick-start a pre-Christmas spending spree in the nation's high streets.

At the same time, he must steady the markets to prevent a further loss of value in the pound, which would signal a loss of faith in the UK economy. He will aim to do this by spelling out in clear terms how taxes will rise in the "medium term" – namely, after the next general election – to repay unprecedented levels of government borrowing, set to top 100 billion by April.

This will be more than double the 43 billion forecast in Mr Darling's first Budget speech in March.

But there is the hope, with the British public warming to the Chancellor and to the Prime Minister Gordon Brown at a time of global economic crisis, that Mr Darling, the MP for Edinburgh South West, could prove to be the "safest pair of hands in the government" he has been dubbed for so long.

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One long-term Labour friend and colleague, the MSP and peer George Foulkes, even drew unlikely parallels between Mr Darling's predicament and John Sergeant's appearances on BBC's Strictly Come Dancing. He told The Scotsman: "I think he has endeared himself to people in the same way John Sergeant has done, just by doing it differently from the way people expect. He doesn't get carried away with his position and does not get over-upset by criticism."

At Westminster, Labour MPs know Mr Darling's performance will be a huge influence on voters, both in securing their faith in the government – and in choosing whether to reward or punish it at the ballot box.

Tom Harris, a Glasgow MP and former transport minister, said: "It's obviously the most important speech he is going to make. If he can pull it off, there are huge ramifications for the political scene but, more importantly, for ordinary families and their day-to-day existence. I think it's fair to say there is a huge amount of confidence among Labour MPs in Gordon and Alistair's management of this."

Mr Darling has seen a turnaround in his own status, with his measured – some might say dull – style now seen as his greatest asset. He and the Prime Minister now outscore Tory rivals, David Cameron and George Osborne, by some distance.

"At a time of such crisis, I'm not sure you would want some kind of more colourful character standing at the dispatch box," Mr Harris said. "You want somebody who, I'm afraid to say, looks and sounds like a bank manager."

John McFall, Labour MP and chairman of the Treasury select committee, agreed. "I think that his personality is appropriate for these times. What we have got to do is be calm. Alistair is a calm politician and a precise politician and that fits the time."

But the cool Chancellor seen today is a far cry from the Conservative supporter of his university days (he read law at Aberdeen) or the bearded, left-wing militant who did all he could to defeat Thatcherism in his five years on Lothian Regional Council in the 1980s.

Recalling his time on Lothian, one Labour acquaintance said: "He was very radical then. People with these views today would be called Trots."

Lord Foulkes attributed the long-term change in the Chancellor's politics to his wife, Maggie Vaughan.

He said: "I think the biggest influence on him has been Maggie. She is very down-to-earth. She is very sensible."

Lord Foulkes said Mr Darling's "downbeat" manner was a great asset.

"He is probably one of the most modest, least pompous of any Cabinet ministers I have ever seen, but also very able. He has got the advocate's skill of reading complicated briefs and being able to understand it quickly, then being able to express it reasonably simply."

David Torrance, a writer who profiled Mr Darling for his book The Scottish Secretaries, said the Chancellor was a pragmatist from a One Nation patrician Tory family background: "He is not going to say, 'We are not going to spend our way out of a recession' because ideology tells him that is the wrong thing to do. Whereas a lot of New Labour politicians of his generation have embarked upon a long political journey, I don't really see the same about him."

Mr Torrance said the Chancellor had moved from neo-Thatcherism to becoming a "happy convert to Keynesianism" in his time at 11 Downing Street.

PROFILE

NAME: Alistair Darling

BORN: 28 November, 1953

EDUCATION: Lorretto School, Aberdeen University (law)

FAMILY: Second marriage to ex-journalist Margaret Vaughan in 1986. Son Calum (b. 1988), daughter Anna (b. 1990).

JOB: Chancellor

PREVIOUS EMPLOYMENT: Solicitor, advocate, councillor

PREVIOUS POLITICAL POSTS: Chief Secretary to the Treasury; Secretary of State for Social Security; head of Department for Work and Pensions, Transport Secretary

HOBBIES: Music (Leonard Cohen, Pink Floyd, Coldplay, The Killers), films (Midnight Express, Annie Hall and Local Hero), gardening.

IN QUOTES

DARLING ON…

BORROWING:

"One morning I had six letters inviting me to take out a credit card. All of them went in the bucket. Lending needs to be responsible."

THE DOWNTURN:

"People think, well, surely you can do something, you are responsible – so of course it reflects on me."

OTHERS ON DARLING…

"A solid student, an excellent learner who thought for himself – level-headed and remarkably normal."

– Professor Mike Meston, who taught Darling.

"He is a charming, gentle soul, a more rounded human being than most politicians, and certainly not a bruiser."

– Author Ian Rankin

"Barred. We hereby give notice that Alastair (sic] Darling, Chancellor of the Exchequer, is barred from this pub until further notice.''

– Poster in the window of the Utopia Bar, Edinburgh

How others tried to pull rabbits from fiscal hats

Bill Jamieson

ALISTAIR Darling is the latest in a long line of chancellors forced to announce budgetary measures in a tough economic climate.

&#149 23 October 1945: Labour chancellor Hugh Dalton cut standard tax rate from 50 to 40 per cent and cut purchase tax on coal and gas stoves, electric fires and fridges. Reaction was favourable but a leak created a storm. Dalton resigned two days later.

&#149 6 April 1949: Sir Stafford Cripps cut food subsidies, raised the pools tax from 20 to 30 per cent and hiked postal and phone charges. "A grim, Draconian feat of national accountancy" was how The Times described it.

&#149 9 March 1968: IMF help with borrowings came with a price tag. In the midst of an economic crisis and a need to cut consumer spending by two per cent, Chancellor Roy Jenkins raised virtually all taxes, particularly on investment income. The 923 million of tax rises was the biggest ever. The grim package helped boost the .

&#149 26 March 1974: Denis Healey's first budget raised income taxes across all bands. He also hiked Corporation Tax by 12 per cent to 52 per cent, raised national insurance for employers and employees, drove up taxes on investment income, slapped 10 per cent VAT on petrol and raised rail and phone charges. The Daily Telegraph called it a "curdled brew of Socialist gall".

&#149 12 June 1979: Conservative chancellor Geoffrey Howe controversially cut the top rate of tax from 83 to 60 per cent and the basic rate from 33 to 30 per cent. But VAT was doubled from 8 per cent to 15 per cent, higher petrol duty put 10p on a gallon and NHS prescription charges were raised. "Unfair, unjust, inflationary and reckless" was how the Opposition leader James Callaghan described the measures.

&#149 15 March 1988: Nigel Lawson's fifth budget cut income tax by 2 per cent to 25 per cent, and took all higher rates down to 40 per cent. Independent taxation for married couples was introduced. It delighted Conservatives, outraged Labour – and was held up by a protest from SNP MP Alex Salmond.

&#149 30 November 1993: Faced with huge state borrowing, Ken Clarke's first budget was a mix of spending cuts and deferred tax increases. Measures included cuts to mortgage tax relief, higher petrol and excise duty, and a new insurance premium tax. The Mirror was unimpressed: "16 a week picked out of your pocket."

PRE-BUDGET REPORT: MORE COVERAGE

• Tax set to rise for very rich while rate of VAT is slashed

• Mandelson expresses 'alarm' at local banks

• Oh, VAT on earth does all of this mean?

• Bold steps needed to traverse financial tightrope