Parliamentary Monitor ‘vox pop’ on Alistair Darling’s first budget
by Dr. Ros Altmann
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Alistair Darling’s first budget will be unveiled against a troubled economic outlook. Inflation pressures and a possible recession leave policymakers with a dilemma. Rising inflation hampers monetary easing and fiscal expansion is constrained by the already parlous state of public finances. The Chancellor will probably decide to take some economic pain over the next year or so, rather than trying to stimulate the economy with increased public spending, leaving room for a fiscal stimulus, if needed, ahead of a 2010 election. Fiscal policy has been too lax for too long and consolidation now will allow better alignment of the political timetable with the economic outlook, while blaming current economic woes on overseas factors.
As regards specific policy measures, public sector pension reform is urgent. These costs are spiralling out of control and pose a significant threat to our long-term public finances. Some reform of the national insurance system is long overdue, perhaps raising the ‘cap’ to £100,000 and also cutting the annual limits on pension contributions that attract full higher rate tax relief. Reductions in petrol duty and other indirect taxes would help the inflation outlook, after the huge rises in fuel and raw material prices. A moratorium on the dismantling of the post office network and further reform of women’s pension rights to remove remaining anomalies and the new unfairnesses created by the 2010 changes, would be welcome – but I won’t hold my breath for these!