Budget 2009 blog

This year's Budget is the first since the full scale of the global economic crisis has become clear. Politically, it is seen as Labour's last big chance before the next general election to shape the new economic climate and convince the electorate that the government is taking the right action for recovery. Coming in the wake of the Damian McBride affair that has stained the government's reputation, today's announcements - and how they are received - are crucial in Labour's battle to regain the initiative. We already know one of the centre-pieces: a £1bn rescue package for the housing market along with a new fund for council accommodation. But the Chancellor, Alistair Darling, and Gordon Brown are likely to have one or two surprises planned. The 2009 Budget follows last autumn's pre- Budget report, which forecast only a 1 per cent decline in growth, and an upturn mid-year. Today, Mr Darling is likely to correct that mistake with an estimate closer to a 3 per cent contraction. He is also likely to announce a total spending cut of £15 billion, in an attempt to outflank the Conservatives.

Will it be enough? From the kick-off of Prime Minister's Questions at 12.00, through the Budget statement at 12.30, New Statesman's political correspondent James Macintyre will be live-blogging from inside the chamber of the House of Commons.

The Chancellor's Budget statement

13.25 To conclude, this is a bold budget, the headline for which is the raising of the top bracket of income tax - for earnings over £150,000 - to 50 percent. At a stroke Darling has pleased his party and wrong-footed the Tories, who now must decide whether to back the tax rise on the very rich, at a time of much-needed revenue, or to oppose it and fall into Brown's trap, allowing them to be cast as tax cutters and the party of the wealthy. A wider analysis to come later this afternoon.

13.21 Darling commends the Budget to House and is patted on arm by a grinning Brown.

13.21 Darling has only a few pages left out of about 30 - House getting restless.

13.20 One off increase in Winter Fuel Allowance to be maintained.

13.17 Grandparents - carers' work will count towards their entitlement to the basic state pension.

13.17 Child element of child tax credit to increase by £20.

13.16 Darling drawing to a close - "Everything we have done..is based on our values of fairness and opportunity and even at this time..we are determined to build a fairer society."

13.11 £430million extra support announced for energy efficient buildings.

13.10 £750million investment fund for technological advancement announced.

13.10 Main capital allowance doubled to 40 per cent.

13.09 £50million announced for armed forces housing.

13.06 Interesting that Osborne is being advised by state-slasher extraordinaire Oliver Letwin, not Ken Clarke, who is safely sat three places along on the Oppositiom front bench. KC looks out of the loop as GO, OL, Hague and Cameron consult.

13.06 A billion pounds to combat climate change by supporting low carbon industries and "green collar" jobs.

13.04 Alcohol duties up by 2 per cent from midnight tonight. Tobacco duty to increase by 2 per cent from 6pm tonight.

13.02 Darling: "I am not proposing to increase tax on incomes this year". However, from next April there will be a new top rate of tax - 50 per cent - for those earning more than £150,000. Very dramatic. Bold. Social democratic.

12.58 Tax loopholes to be closed to raise a billion pounds. Darling wants to "address anomoly" on pensions.

12.56 UK net debt will, as a share of GDP, increase from 59 per cent this year to 79 per cent by 2013. Will stabilize by 2016. Mock shock on Tory benches.

12.55 Borrowing will be 11.9 per cent next year as a share of GDP.

12.54 Public sector borrowing will be £175billion.

12.53 Darling: "We could have decided to do nothing.." - Labour cheers and Tory jeers.

12.52 Scrappage scheme for a £2000 discount on trading cars over ten years old is announced.

12.50 Housing - Darling to introduce a scheme to back mortgages. Stamp duty holiday on properties worth less than £175,000 to be extended until the end of year.

12.49 54,000 places guaranteed for further education.

12.48 Skills - £260million to be spent on skills training for young people.

12.46 Labour cheers as Darling announces that from January everyone under 25 out of work for a year will receive a new job or training guaranteed.

12.46 Additional support announced for those out of work for a year through flexible New Deal.

12.45 Jobs - Darling announces steps to ensure people getting back to work - Job Centre Plus and New Deal to get £1.7bn more funding.

12.44 Darling says "deepening global recession has had an impact on public finances" but predicts a halving of the deficit in the coming years.

12.42 From 2011 Darling forecasts growth from 3.5 per cent from then on - Tory outrage. The trouble for Darling is he got last year's forecast wrong, but he has doubtless done his homework.

12.41 Darling addresses economic contraction - forecasts minus 3.5 per cent - to theatrical whistling from Tory MPs, but says that "because of our underlying strength" growth will pick up again towards the end of year. Tories shout "what?"

12.40 Still no reaction from MPs. Darling using a persuasive and calm speaking style.

12.40 Darling: "there are no quick fixes."

12.39 Ed Balls, who admitted to the NS last month that he wants to be Chancellor, is nodding profusely.

12.36 Darling has yet to make any substantive announcements and is running through the current economic climate.

12.35 It is a mark of the cross party respect for Darling that his Budget has so far been received in uncharacteristic silence from MPs.

12.34 Darling revises PBR prediction of growth mid year to "towards the end of this year".

12.33 Darling refers to the most serious downturn in 60 years - a claim he made last year in the Guardian only to be briefed against by Balls and McBride.

12.32 Darling: "Taken together this Budget will build on the strengths of the British economy and its people."

12.31 Darling rises - "today's Budget will continue to help people through this recession." House silent.

12.30 Darling unclips his notes in his usual unflappable style and prepares to rise to the occasion. No sign of a pale single malt - just a very New Labour jug of still water in front of him. So ends a surprisingly uneventful PMQs. Now for the main event.

Prime Minister's Questions

12.23 Catherine MacLeod, Darling's special adviser and a former journalist, is in her place in the press gallery looking down at the Chancellor.

12.23 Press pack surprised at Cameron holding back on smeargate. Maybe it will be raised in the Conservative response to Budget, or maybe he is waiting until a non-Budget day - such as next week.

12.22 Nadine Dorries asks for an apology over McBride. Brown says "yes...what happened has no part to play".

12.20 Martin Linton raises Gaza and calls for an independent inquiry about Israel's behaviour there. Brown says he got an agreement from former PM Olmert for an inquiry. "All allegations of war crimes must be investigated."

12.17 Tory MPs jeer at the mention of the G20. Simon Hughes asks about Tamils' plight in Sri Lanka and calls for a ceasefire. Brown shuffles through his huge pack of notes and expresses "concern and dismay" on behalf of the whole House, says he is pressing forward for a political settlement. Tory MPs shuffling in their seats, wanting a fight. Cameron has another bite.

12.16 Clegg says "do the new jobs exist yes or no" to childish wolf wistles from Labour and Tory MPs.

12.14 Nick Clegg rises and goes on jobs - is shouted down by Labour MPs. How many new jobs created? Brown says as a result of action hundreds of thousands of jobs have been saved, and trails Darling's Budget.

12.12 Darling looks totally calm, as ever, as the House rages around him.

12.10 Brown is dominating this exchange, comfortable on his economic turf. Says Cameron was "chief economic adviser" to the ERM crisis. Cameron says "perhaps on another occasion we can talk about some of your chief advisers...he brought his party to moral bankruptsy". Tory MPs love it and want more, but it appears I was wrong - Cameron, probably to his credit, is avoiding McBride and wants to be seen to focus on economy. He knows he can leave McBride to the media.

12.10 Again Brown relies on Labour spending versus Tory cuts. Balls is said to favour this approach more than Peter Mandelson.

12.06 Brown says he has examined the figures and there are a million more young people in work than in 1997. Cameron accuses him of "massaging figures" - Darling and Brown shake their head. Cameron has yet to land a major punch.

12.05 Laughter as Speaker tells MPs not to tell the PM what to say. Brown says tax credits have been extended, scheme to help those six months unemployed - then draws the traditional divide between Tory cuts and Labour spending. Reasonable reception by Labour MPs.

12.04 Cameron rises to loud cheers. Goes on unemployment first. Wants to sound statesmanlike. Asks for confirmation of "the fastest increase in unemployment in our history."

12.03 Brown pays tribute to the 96 who died at Hillsborough.

12.00 PMQs begins with silence across chamber and anticipation. David Simpson MP asks about the impact of scrapping Barnett formula on NI.

11.59 Gordon Brown in his place next to Darling and looking slightly tense as he examines his characteristically big handwritten notes. He no doubt has a preprepared line on Smeargate - but will it work?

11.59 The chamber is nearly full as NI questions become almost inaudible.

11.57 Cameron and Osborne closely studying their notes. The Tory leader knows this is a big moment for him - and on McBride, the main issue to come up surely along with MPs expenses, he has an open goal.

11.56 Din in the chamber reaching fever pitch in anticipation of two hours of political theatre.

11.55 Ed Balls and his wife Yvette Cooper have sat either side of Alan Johnson and are laughing across him to one another. Maybe we are in for further tax rises after all.

11.52 Stephen Byers, who said he permitted himself a "smile" when he heard about McBride"s removal, has sat on the far end of the side-benches, and Charles Clarke who said the scandal brought "shame" to Labour before McBride's removal, has just joined him. They look more like observers than foottsoldiers.

11.50 Vince Cable, Lib Dem man of the moment, has taken his place as the Speaker calls the House to order for excitedly talking over NI questions.

11.46 Kenneth Clarke in his front bench place, smiling and looking relaxed with his brown hush puppies outstretched and crossed.

11.45 No sign of Alistair Darling yet. Unlikely he is taking a Thatcher-style "power nap" despite having got up at 5.30 am today.

11.42 Northern Ireland questions. The calm before the storm. Within half an hour the chamber will be packed - it is now half full - and David Cameron will no doubt be using his first opportunity in the House since the Easter break to make all he can of the McBride affair.

James Macintyre is political correspondent for the New Statesman.