Thursday, February 18, 2010

What can we expect from Budget 2010?

So, in a few weeks time, Alistair Darling is expected to stand up in Parliament and deliver the Labour manifesto 2010 Budget. Whatever it contains will essentially be the platform that Labour will campaign on in the forthcoming election, so what might that be? Well, I expect some of it will be about election positioning, but other parts will be about political positioning in the event of a defeat.

So, here are five predictions from moi....

1: Don't expect an increase in income tax or taxes on income (yet), and possibly even see a calculated cut offset against a hidden rise elsewhere - We've seen Labour do this before when they scrapped the 10p rate and cut the base rate of income tax and made themselves look like tax cutters whilst actually increasing tax.

They might try and do it again, although it seems more likely to me that they will hold the obvious taxes static. This will be designed to take advantage of any tax increases in an Emergency Budget in the event of a Tory win. Remember that this budget is as much about trying to win the voters over as it will be about giving Labour a position to attack from in Opposition.

2: No increase in VAT - It's seems quite well accepted now that the chances of a VAT rise to reduce the deficit will be necessary. By not proposing it in the 2010 Budget, Labour can easily switch tack in a Pre-Budget Report if necessary, or again, bash the Tories over the head if they increase VAT in an Emergency Budget.

3: A raising of the Inheritance Tax threshold - this is going to be classic New Labour triangulation. The Tory IHT proposal is popular and the Labour line that it only helps multi-millionaires doesn't resonate that well because people living in an average house price house with a life insurance policy still see themselves being hit.

The problem Labour have is that even though allowances are transferable between spouses and civil partners, explaining that minutiae is not pithy enough. I reckon they will raise the IHT threshold to between 400K and 450K in the hope of taking the wind out of the Tory sales on the issue.

4: Lots of "efficiency savings" - These will be pie in the sky figures of how they're going to cut spending without cutting "front line services". There will also be reference to the Tories and savage cuts.

5: Increases in tax credits - this is a nice easy one for Labour to propose because of the amount of people that don;t take tax credits who could. They can easily promise an increase safe in the knowledge that it won't make much difference.

They'll also use the word "universal" when talking about tax credits. This has already been trailed by Ed Balls in articles as a dividing line for the election where the Tories have said they want to reform credits so that only people that actually need handouts from the state can qualify.

There is also a post election advantage here if Labour loses. They position themselves ready to make the "evil bastard Tory cutters" when it comes to social benefits.

As I say, these are just predictions of what I think will happen. Whilst it will take a while to pick apart whatever is said, the crucial thing to look out for are budget statements that are designed for post-election positioning. Sure electioneering will be in the budget, but we'll have an indication of the positions "Labour in Opposition" might be planning.

Should be fun! Feel free to add other predictions in the comments.

Note: Apologies for the lack of posting but I had man-flu. Also, I have progressively worsening carpal tunnel syndrome which is impeding on my ability to type without being in pain.

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