Another side splitting submission by the chancellor

09 December 2009

So the Chancellor delivered his pre budget report today with his usual sense of mirth. But he resisted the temptation to throw out pretend figures willy nilly, as not everyone saw the funny side 12 months ago.

In November 2008, as we stumbled towards the eye of the storm, Mr Darling predicted that the government’s borrowing would reach £118bn by the end of 2009, before falling to £105bn and then £54bn in 2010. Cue hoots of derision and yells of ridicule from the retired majors, Oxbridge graduates and members of the Hellfire Club on the opposition benches.
One year on and it turns out that the Eton Rifles were pretty safe to laugh out loud. And so today when Mr Darling admitted that the deficit was now £178bn and he predicted a fall to £176bn next year, there were less belly laughs and more muffled sniggers from the back of the class.
I think we’re becoming a bit immune to the shock effect of the figures. Would anybody have really noticed if the Chancellor had said, ‘I’m confident that our current deficit of eight hundred trillion will reduce by over 3 per cent next year’? Not everyone by a long stretch.
What does it actually mean for us in business? In general terms some spending cuts and tax rises. But more specifically:

  • We can anticipate a further half per cent increase in national insurance in 2011.
  • VAT will be going back up to 17.5 per cent from January. Mr Darling said: “To cut support now could wreck the recovery.” Does he know something I don’t?
  • The Chancellor confirmed the government was seeking cash from major banks for a £500m Capital Growth Fund that would help increase lending to small and medium-sized businesses. Good.
  • The £500m fund will be voluntary. Bad.
  • And we can have our own laugh at the banks. There will be a one-off levy of 50 per cent on bank bonuses above £25,000, to be paid by the bank, not the employee. Bonus levy is expected to yield £550m. But maybe we shouldn’t giggle too much. I haven’t worked out where the banks will get the money from yet.


And speaking of which, I hear 1,000 disgruntled RBS investment bankers are threatening to leave the country in response to the government’s clampdown on bonuses. In light of RBS’ well documented difficulties over the past 24 months, does that qualify as a talent drain?

Stuart Wilkin writes for Insider.

Posted  09 December 2009


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