A Budget with looming shadows

There were no rabbits in his hat. Hanging over Darling's speech was the spectre of global economic u

First it was going to be the green Budget. Then it was the anti-booze Budget, next the steady-as-she-goes Budget and, just at the last moment, the child poverty Budget. Budgets these days have to be all things to all people, or at least most things to as many people as possible. With a growing political consensus over the priorities of government, this would have been true even if it had been George Osborne standing up in parliament on 12 March. Budgets must be business-friendly and yet tackle inequality; they must give generously to public services while cutting the tax burden; and they must address the immediate issues of the day - this year it is the turn of first-time housebuyers, supermarket plastic bags and polluting cars.

In the end, Alistair Darling's first Budget has been the "hard truths" Budget. Under the pressure of an ever-slowing economy, the Chancellor was forced to outline the bleakest financial situation since Labour came to power in 1997, although not quite as grim as some predicted. He should be congratulated for avoiding the temptation to pull last-minute rabbits out of hats. "Not really his style," according to one aide.

As expected, he downgraded his forecast for growth for 2008, outlined in his Pre-Budget Report as being between 2 and 3 per cent, to between 1.75 and 2.25 per cent. Scare stories from the weekend before the Budget suggested he would need to raise £240 per household in taxes to plug a £5bn black hole in the public finances. The sums may appear complex and confusing, but much of the Chancellor's work is simple arithmetic - as revenues to the Exchequer drop, he either has to tax more or borrow more to honour the government's spending plans. In the end he will do a bit of both, but either way, Darling is in a dark place.

As he prepared the Budget in the full knowledge that the Bank of England, the European Central Bank and the US Federal Reserve were all pouring billions of dollars of funds into the money markets to avoid a global recession, he must have felt like the unluckiest man alive. Alone at the Despatch Box with just a glass of tap water for company, Darling was on the spot and it was his job and his alone to inform Britain of the naked truth about the state of the economy. His contention that the present situation is not as serious as during the worst Tory years is basically sound. Britain is still a high-employment, low-inflation economy. Growth may be slowing down but it had, indeed, been sustained for 62 quarters, a better record than for any of our major competitors.

It is also true that Darling has been dealt a duff hand, and not just by the American "sub-prime" mortgage crisis (for which no one can hold him responsible) but also by decisions of his predecessor, who built an edifice of public spending commitments on the assumption of continued growth. But, to an extent, politicians create their own luck and much of Darling's speech was taken up with atoning for the political miscalculations of his Pre-Budget Report in October. He held his nerve on the £30,000 levy on "non-domiciles", who avoid paying tax in Britain by moving their financial affairs elsewhere, but was forced into concessions. It is thought a deal has also been reached with the US Treasury on payments from American citizens. The Chancellor's attempt to simplify capital gains tax by introducing a flat rate of 18p had to be revised after he came under pressure from the business community. In less difficult times, such changes would have been seen as tweaks. In the present atmosphere, however, everything Darling does is scrutinised by the City for signs of indecisiveness.

As the analysis of the Budget plays out, attention will inevitably turn to the reaction in the Square Mile, where the knives have been out for Darling almost from the moment he arrived at 11 Downing Street. But some of the wisest economic heads in the country are turning to another area of grave concern: the state of our public finances. It is of course true that everyone is affected by the mood of Britain's financial markets, but a far more immediate impact will be felt as the money for schools and hospitals starts to dry up.

One problem for Darling is the growing national debt. The Chancellor's best Budget soundbite - that Labour has "turned welfare into work and borrowing into wealth creation" - is at the very least arguable. The Chancellor made much of Labour's record on borrowing. But David Cameron was right to raise the issue of Northern Rock. The so-called "sustainable investment rule", which states that net public borrowing should remain at or below 40 per cent, has already been shaken by the nationalisation of the high street bank, whose liabilities in reality push the figure closer to 45 per cent. If estimates of the economic slowdown are correct, the borrowing necessary to plug the hole in the public finances will push this figure even higher. In fact, even Darling's estimates push it within a percentage point of the 40 per cent danger point.

The investors' verdict

Then there is the looming shadow of the government's Private Finance Initiative schemes, which were designed specifically to keep borrowing off the Treasury's balance sheet. These projects, which use private funding for large public projects such as schools and hospitals, will soon be included as part of the national debt to bring Britain in line with International Financial Reporting Standards. At the same time, liabilities from public sector pension schemes, which have been badly hit by the international credit crunch, will also contribute to the growing debt. Some estimates suggest that the combined liabilities of pension and PFI schemes would bring the proportion of debt to 100 per cent of GDP.

In one sense, the sustainable investment rule is just an arbitrary measure, set by the government to measure its own economic competence. What really matters is the attitude of global financial institutions to such profligacy, and investors' preparedness to put their money into new projects. In the new period of economic uncertainty, the British public would certainly begin to notice if plans for a shiny new hospital or school were put on ice. Already concerns have been raised about the slow progress of the government's PFI-funded Building Schools for the Future programme.

The real issue is that we don't know the full consequences of the slowdown for the public purse. New Labour has never been here before. A recent article by Paul Gosling in Public Finance magazine put it succinctly: "Underlying everything is a fog of uncertainty. The use of 'financial engineering' and the complex hedging of financial risk means there is very real confusion about exactly who has lost what from the sub-prime crisis - and that is affecting almost everything on the world's financial markets."

Darling's first Budget was just the sort of solid, unflashy affair demanded in the circumstances. Many of the details will be welcomed by people Labour should care about: children, the poor and the old. But it will all mean nothing if he fails to address that fog of uncertainty afflicting the public finances.

This article first appeared in the 17 March 2008 issue of the New Statesman, Iraq: the war that changed us

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The UK press’s timid reaction to Brexit is in marked contrast to the satire unleashed on Trump

For the BBC, it seems, to question leaving the EU is to be unpatriotic.

Faced with arguably their biggest political-cum-constitutional ­crisis in half a century, the press on either side of the pond has reacted very differently. Confronting a president who, unlike many predecessors, does not merely covertly dislike the press but rages against its supposed mendacity as a purveyor of “fake news”, the fourth estate in the US has had a pretty successful first 150-odd days of the Trump era. The Washington Post has recovered its Watergate mojo – the bloodhound tenacity that brought down Richard Nixon. The Post’s investigations into links between the Kremlin and Donald Trump’s associates and appointees have yielded the scalp of the former security adviser Michael Flynn and led to Attorney General Jeff Sessions recusing himself from all inquiries into Trump-Russia contacts. Few imagine the story will end there.

Meanwhile, the New York Times has cast off its image as “the grey lady” and come out in sharper colours. Commenting on the James Comey memo in an editorial, the Times raised the possibility that Trump was trying to “obstruct justice”, and called on Washington lawmakers to “uphold the constitution”. Trump’s denunciations of the Times as “failing” have acted as commercial “rocket fuel” for the paper, according to its CEO, Mark Thompson: it gained an “astonishing” 308,000 net digital news subscriptions in the first quarter of 2017.

US-based broadcast organisations such as CNN and ABC, once considered slick or bland, have reacted to Trump’s bullying in forthright style. Political satire is thriving, led by Saturday Night Live, with its devastating impersonations of the president by Alec Baldwin and of his press secretary Sean Spicer by the brilliant Melissa McCarthy.

British press reaction to Brexit – an epic constitutional, political and economic mess-up that probably includes a mind-bogglingly destructive self-ejection from a single market and customs union that took decades to construct, a move pushed through by a far-right faction of the Tory party – has been much more muted. The situation is complicated by the cheerleading for Brexit by most of the British tabloids and the Daily Telegraph. There are stirrings of resistance, but even after an election in which Theresa May spectacularly failed to secure a mandate for her hard Brexit, there is a sense, though the criticism of her has been intense, of the media pussy-footing around a government in disarray – not properly interrogating those who still seem to promise that, in relation to Europe, we can have our cake and eat it.

This is especially the case with the BBC, a state broadcaster that proudly proclaims its independence from the government of the day, protected by the famous “arm’s-length” principle. In the case of Brexit, the BBC invoked its concept of “balance” to give equal airtime and weight to Leavers and Remainers. Fair enough, you might say, but according to the economist Simon Wren-Lewis, it ignored a “near-unanimous view among economists that Brexit would hurt the UK economy in the longer term”.

A similar view of “balance” in the past led the BBC to equate views of ­non-scientific climate contrarians, often linked to the fossil-fuel lobby, with those of leading climate scientists. Many BBC Remainer insiders still feel incensed by what they regard as BBC betrayal over Brexit. Although the referendum of 23 June 2016 said nothing about leaving the single market or the customs union, the Today presenter Justin Webb, in a recent interview with Stuart Rose, put it like this: “Staying in the single market, staying in the customs union – [Leave voters would say] you might as well not be leaving. That fundamental position is a matter of democracy.” For the BBC, it seems, to question Brexit is somehow to be unpatriotic.

You might think that an independent, pro-democratic press would question the attempted use of the arcane and archaic “royal prerogative” to enable the ­bypassing of parliament when it came to triggering Article 50, signalling the UK’s departure from the EU. But when the campaigner Gina Miller’s challenge to the government was upheld by the high court, the three ruling judges were attacked on the front page of the Daily Mail as “enemies of the people”. Thomas Jefferson wrote that he would rather have “newspapers without a government” than “a government without newspapers”. It’s a fair guess he wasn’t thinking of newspapers that would brand the judiciary as “enemies of the people”.

It does seem significant that the United States has a written constitution, encapsulating the separation and balance of powers, and explicitly designed by the Founding Fathers to protect the young republic against tyranny. When James Madison drafted the First Amendment he was clear that freedom of the press should be guaranteed to a much higher degree in the republic than it had been in the colonising power, where for centuries, after all, British monarchs and prime ministers have had no qualms about censoring an unruly media.

By contrast, the United Kingdom remains a hybrid of monarchy and democracy, with no explicit protection of press freedom other than the one provided by the common law. The national impulse to bend the knee before the sovereign, to obey and not question authority, remains strangely powerful in Britain, the land of Henry VIII as well as of George Orwell. That the United Kingdom has slipped 11 places in the World Press Freedom Index in the past four years, down to 40th, has rightly occasioned outrage. Yet, even more awkwardly, the United States is three places lower still, at 43rd. Freedom of the press may not be doing quite as well as we imagine in either country.

Harry Eyres is the author of Horace and Me: Life Lessons from an Ancient Poet (2013)

This article first appeared in the 20 July 2017 issue of the New Statesman, The new world disorder