Budget 2010: Alistair Darling may have some surprises up his sleeve

In a column earlier this week I cautioned not to expect any great surprises from the forthcoming Budget. What I meant by this was that there would be no great fiscal giveaways or takeaways. The numbers on this front would remain much the same as in last December’s pre-Budget report.

The story in this morning’s Financial Times to the effect that the Chancellor will use any positive surprises in the public finances – it’s looking as if the Government won’t have to borrow quite as much this year as previously thought – for deficit reduction rather than pre-election giveaways chimes with this view. Darling seems to have won the argument with Brown over this, though much could change over the next few days. In the past Brown has tended to wait until the last moment to impose his will on Darling.

Past experience of cautious, steady as she goes, pre-election budgets is that they don’t tend to win votes. If you are down in the polls, it is usually better to throw caution to the wind even when you’ve basically got no fiscal flexibility to do so. That was Norman Lamont’s strategy in 1992 when he announcing a big tax giveaway for the low paid, and it worked. But there is even less scope for it this time around, and it is hard to see how Labour could credibly get away with it.

Whatever. There may be no scope for tax giveaways, but there is plainly still lots of room for changing the balance of taxation in a surprising and electorally advantageous way.

I doubt he’ll try to tax the rich any further than he already has to pay for tax breaks for the poor, though it should not altogether be ruled out. It is possible to date Labour’s poll revival almost exactly to the announcement of the banker bonus tax. These things play well with the gallery, so it’s possible.

I’ve got no inside track on this, but how about the following as a crowd pleaser – Labour nicks today’s Tory proposals on carbon taxes and spends the proceeds on meeting the costs of the Lib Dems’ plans for taking the low paid out of the tax net altogether. Surveys show that people don’t on the whole mind the idea of environmental taxes. If used to raise income tax thresholds it could work in Labour’s favour.

Too complicated to do at the last moment? Perhaps. The complexities introduced into the tax system by all the other changes due to come into effect over the next year are already mind boggling enough without a structural shift of this sort to contend with on top. But Mr Darling will surely want some sort of wow factor amid the greyness of his message.
Telegraph