Analysis: Chancellor's projections for growth a real gamble

Published on Wednesday 22 April 2009 21:57

THE trick, if Alistair Darling can pull it off, will be all in the timing. Can he convince the average voter, come the next election, that he is overseeing an economic recovery – and that they are not being unfairly penalised for the excesses of some greedy bankers?

On first viewing, yesterday's Budget speech is avowedly Old Labour. It punishes higher-earners, who will be expected to pay more tax – on their income, their pension contributions and on their company cars.

But about 660 million more is expected to flow into the Treasury's coffers over the next three years from motorists filling up at the pumps than the 2.9 billion that will be raised by charging six-figure earners a 50 per cent income tax rate.

Over the next three years, the petrol rises are due to yield 3.6 billion.

Next April has all the makings of a key date. With Gordon Brown likely to call an election around that time, the month will see the start of the 50 per cent income tax rate.

Mr Darling's gamble is that it will be quite acceptable to the general populace.

He also has a tax rise in store for them – but not until April 2011, well past the election date. That is when everyone earning 19,000 or more will have to pay an extra 0.5 per cent in National Insurance.

Aside from modest changes in personal finance, yesterday was not about gimmicks, but the bigger picture. It was about Mr Darling demonstrating to the nation that he has a solid grip of the public finances – albeit, in a worse state than at any time in the past 65 years – and that he knows how to turn things round.

He may not sound like a risk-taker, but his growth projections were dismissed by many independent experts as the rashest of gambles. If he has been over-optimistic in forecasting that the UK economy will grow by 1.25 per cent next year, then he, and Labour, can wave goodbye to any claim of economic competence.

And with it, of course, any hope of election victory.