The New Statesman's annual Budget breakfast
Stephen Timms, the Financial Secretary to the Treasury, was quick to acknowledge the response to the Budget in this morning’s Budget Breakfast Briefing, hosted by the New Statesman and Weber Shandwick. “It would have been nice to wake up to more euphoric headlines this morning. But this is a very, very difficult period – there’s no escaping from that.”
Timms did his best to put a positive glow on what must be one of the bleakest budgets of recent memory, listing proposed investments in infrastructure, housing, broadband, and low-carbon energy generation. But he was also sure to convince his audience of the gloomy global context in which the British government were operating, particularly the fact that the world economy is forecast to shrink this year for the first time since the Second World War.
He believes the response to the crisis so far has been impressive – both in the UK’s leadership of the G20 summit which delivered “the biggest macro-economic boost that the world has ever seen” and in measures such as reducing VAT. The government has tried, he said, to confront the recession head-on: “We have learnt I think our lesson from the 1930s when coordination was too little and came too late”.
The headline story from the Budget, raising the top bracket of income tax to 50 per cent, was introduced, said Timms, to make us “live within our means”. James Macintyre, political correspondent at the New Statesman, pointed out the political acuity of the move – forcing the Tories to decide whether they will support it, or by opposing it reinforce the idea that they are the party of the super-rich. Michael Prescott from Weber Shandwick challenged the announcement on the grounds that it tore up a 2005 manifesto commitment. Timms pointed to the massive transformation in the economy that provoked the shift, and its necessity: “My case would be that it is the right change to make to safeguard the economy in a way that’s fair.”
Climate change initiatives contained within the Budget were also trumpeted by Timms who called it the “world’s first carbon Budget” thanks to a legally binding commitment to reduce carbon emissions by 34 per cent by 2020. Significant investment in low carbon transport and energy, including £1.4 billion targeted support in the low carbon sector, was outlined. As was a new employment scheme for anyone aged 18 to 24 who had been out of a job for more than year. The Government has promised to fund NGOs, environmental organisations and local authorities who can create employment opportunities, particularly (although not exclusively) in the environmental sector.
However, the slight inconsistency in Timms’ proposals was pointed out by Hugh Montgomery from UCL who suggested that the £525m suggested investment in wind farms was comparatively low. It also seemed at odds with Timms’ praise of the car industry – the minister had earlier outlined the government’s concerted support of manufacturing, and lauded the increase in British car production over the last 25 years.
Timms could not be drawn, however, on identifying any potential “green shoots” in the economy, not wanting to fall into the trap of his colleague, the Business minister Baroness Vadera, who was heavily criticised for using the phrase earlier in the year. He tentatively suggested that the housing market was showing some early signs of lift and that a smaller rise in unemployment this month than in previous months was a positive sign. But his main source of optimism seemed to be both the major efficiency savings that Whitehall was pushing through (£5 billion announced in the pre-Budget report) and the combination of low interest rates and the fiscal stimulus which would help the UK to “turn the corner” by the end of the year.
There were concerns voiced, however, by Niall Dickson of the King’s Fund and Anthony Langan of the Samaritans, who were anxious that spending cuts and efficiency rounds would take their toll on frontline services. Timms was quick to reassure: “What we mustn’t do is announce a number plucked out of the air and then rush people into delivering it. That would be catastrophic for public services. We’re confident that by setting the target well ahead, making sure there is serious planning that goes into delivering it, that we can bring about quite substantial efficiency savings that don’t damage the services that people receive.”
And what does the broader economic future look like? Challenged by Peter Kellner of YouGov that the government’s optimistic growth projections, which came under fire from much of the media today, were more of a “best guess than a robust forecast”, Timms admitted that “there is a great deal of uncertainty about exactly what’s going to happen over the next couple of years.” However he pointed out that others - Morgan Stanley, Goldman Sachs and Société Générale - amongst them, had made even more optimistic forecasts than the government’s 1.25 per cent growth in 2010. The figures the government announced “are our best shot at what’s going to happen”, said Timms. But they come, with the general caveat that no one really knows how this recession is going to play out – the only thing we can be sure of is the “huge volatility” in the current climate.
Tags: Budget 2009