Brown at 10 by Anthony Seldon

Author:Anthony Seldon [Anthony Seldon and Guy Lodge]
Language: eng
Format: epub
Tags: political science, Political Process, Leadership, Biography & Autobiography, Historical
ISBN: 9781849540896
Google: KuqtAwAAQBAJ
Publisher: Biteback Publishing
Published: 2011-10-03T23:24:45.556950+00:00

Budget Battles: April 2009

The London G20 had pushed the Budget back from its normal slot in early March. The new date was now 22 April, giving Brown just three weeks to prepare for it, at a time when he was heavily distracted and depressed by the McBride fallout. Number 10 knew that Darling’s second Budget, and the first since Britain had gone into recession, ‘was always going to be very difficult’.53 That is an understatement. In the first quarter of 2009, the economy contracted by 1.9 per cent, the worst performance for thirty years,54 and considerably worse than Darling’s forecast of between minus 0.75 per cent and minus 1.25 per cent. Unemployment had risen to 7.1 per cent55 and repossessions were widely ‘predicted to soar’.56 The Bank of England responded by reducing interest rates to a new record low of 0.5 per cent in an attempt to boost consumption.57 In another arm of monetary policy, and with the full support and encouragement of Brown and his team, the Bank embarked on a programme of ‘quantitative easing’, more simply known as ‘printing money’, announcing on 5 March a creation of some £75bn over the following three months.58 ‘It was like bang, bang, bang. We went from the Bank recap into the fiscal stimulus, into asset protection and then quantitative easing. It was just like a series of horrific events,’ says one senior official.59

But the depth of the recession was just one of several worries. The size of the deficit was a horrific anxiety for those planning the Budget, and how to respond to it produced bitter divisions. The longer the recession continued, the more the deficit grew, as tax revenues fell and welfare payments and other expenditure rose. In late March, the IMF released a forecast suggesting that Britain would have the worst fiscal deficit of any G7 nation.60 Darling’s Pre-Budget Report forecast for the fiscal year beginning in April 2009 was £118bn, but the IMF predicted that it would be £165bn.61 When announced in the Budget on 22 April, it was even worse at £175bn.62

From the start of the year, the media increasingly locked on to the size of both the Budget deficit (the gap between government expenditure and tax revenue in a given year) and the overall level of public debt (which represents the accumulated sum of previous borrowing minus repayments). In February, The Guardian warned that ‘debt hits record’ 47.8 per cent of GDP,63 while The Times stated that public debt ‘could exceed 65 per cent of GDP in 2010–11’.64 The Financial Times attributed the unsuccessful gilt auction in March to ‘alarm over rising UK debt levels’.65 ‘The public narrative of debt had become the defining issue. It freaked everyone out,’ says a Number 10 aide.66 Concerns grew about how long market confidence would tolerate these levels of borrowing – and what might happen if it was ever to be lost.

The government seemed increasingly vulnerable to the attack heard in Cameron’s speech to the London School of Economics, on ‘reckless borrowing and spending’.

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