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

India Bourke
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Pegida UK: the new face of Britain’s far-right movement, and how to challenge it

“Let them drink tea,” Birmingham tells Islamophobes.

“Spooky,” is how Pegida UK – the latest branch of a global, anti-Islam, protest group  chooses to describe its silent march on the outskirts of Birmingham. 

“Islam is Nazism incarnate,” announces its new leader, Paul Weston, to a few hundred soggy, sober, brolly-clad protesters waving “Trump is Right” placards. 


Pegida UK protestors march through the rain. Photos: India Bourke

Such numbers are a far cry from the tens of thousands who attended the movement’s inaugural rallies in Germany in 2014, in response to the perceived “Islamisation” of Europe. And they would be derisory if the cheers Weston receives from his supporters weren’t quite so chilling, nor echoed so far.

For Pegida UK is not alone. From Calais to Canberra, thousands marched in the name of the movement’s toxic platform of anti-immigration and anti-Islam last weekend. I went to see the Birmingham rally to find out why such a protest is taking place in Britain.

***

"Today is the first of many European wide demonstrations that will bring people together like never before,” Tommy Robinson, UK founder and ex-EDL leader, tells the assembled crowd. “It's planting the seed of something huge.”

Robinson hopes to exploit a gap within Britain’s far-right. Traditional groups are fractured: the British National Party was decimated at the last election, standing just eight of a previous 338 candidates. In its place, a swell of smaller, extremist bodies – from the Sigurd Legion to National Action – are pressing an ever more militant agenda. Pegida hopes to scale back the hooliganism in order to garner a wider appeal, but it shares these groups’ confrontation with Islam, and each may spur the other on.

“With Pegida we’re seeing the rise of a seminal new threat,” says Birmingham MP Liam Byrne. “In the rise of Isis and politicians like Donald Trump, you have forces determined to promote a clash of civilisations between Islam and the West. Pegida is trying to surf that wave and make sure it crashes on our shores.

Opponents hope the movement will suffer the same implosion that felled the BNP and EDL, with both leaning  too much on their leaders’ personal brands. Robinson certainly seems as adolescent as ever: laughing as he swipes away a photo of a scantily-clad blonde on his iPhone screen to show me the international Pegida leadership’s “hidden” Facebook group.

Their new apparently "suited and booted" middle-class following is also less than wholehearted. One pin-striped IT executive I speak to seems embarrassed by the whole affair: “I’m just a cowardly family man who can’t see a solution being offered by mainstream politicians. I’d be sacked if they knew I was here,” he says, declining to give his name. 


A Pegida protestor poses in front of the main stage.

As long as such hesitation prevails, Pegida UK will struggle. Still, there’s a sense more needs to be done to ensure its demise.

Matching protest with counter-protest is the traditional leftwing response, and this weekend saw thousands of Pegida opponents take to the streets across Europe. Yet, in some cases, direct confrontation can risk drowning out – even alienating – the very voices it seeks to win over.

“Smash the facists into the sea,” instructed the Twitter account of the North London Antifa group ahead of last weekend’s far-right, anti-immigration protest in Dover, where injuries were sustained by demonstrators on both sides.

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Instead, many now believe a better answer begins with that most British of pastimes: tea and a chat.

On the day before the Birmingam march, hundreds of the city’s cross-party leaders, religious figures and citizens gathered together at Birmingham Central Mosque to share their concerns over shortcake and jalebi.

“Groups like Pegida are parasites on the real concerns people have,” says John Page from the anti-extremism group Hope not Hate. “So we have to listen to these issues to close the cracks.

Initiatives around the city will attempt to take this approach, which sets a welcome lead not just for the UK, but Europe too.

The blanket smearing by groups like Pegida of Islam as a religion of sexist, homophobic Jihadi Johns places the burden of action disproportionately on the city’s Muslims. “It is our turn now to suffer these attacks,” says Mr Ali, Birmingham Central Mosque’s 42-year-old administrator. “It was the Irish, then the Jews, and now it is the time for us. But we are proud to be British Muslims and we will do what we can to defend this country.” 

A permanent visitors gallery, Visit-my-Mosque events, and publications that condemn Isis, are just some of the ways the community is challenging demonisation. It is even hosting a documentary crew from Channel 4 – a bold move in a city still reeling from Benefits Street.


Birmingham resident, Luke Holland, at a peaceful counter-protest in the city centre.

Mr Ali says: “The extreme right know nothing about Islam, but neither do many Muslim extremists.” The mosque is therefore in the process of formulating a “code of conduct”, making clear that hate speech of any kind is unacceptable.

"We have to help young people become the next Chamberlains and Cadburys and Lucases of this city," regardless of background, says Labour councillor Habib Rehman. Instead of letting them slip into despair and extremism of any kind, "we have to tell them: 'Yes You Khan!’”

Tea and talk is not the most dramatic response to Pegida’s claim it will have “100,000 decent people on the street” by the end of the year. But, in Birmingham at least – the city of Typhoo, where bhangra is as familiar as Bournville, and “No dogs, no Irish!” still sits heavy on the collective mind – tea, for now, means hope.

India Bourke is the New Statesman's editorial assistant.