labours mini budget # Nov 2008

George Osborne made at least one telling point in his response to Alistair Darling's emergency Budget (and let us not be shy to call it that). This was a package of measures that had little to do with the economic cycle, and much to do with the political one. An election must be held by the late spring of 2010.
Given how dreadful things are likely to get, with perhaps 3.25 million people on the dole by then irrespective of what fiddling Mr Darling does, the Prime Minister may well want to go to the country much sooner than that, before the full damage becomes apparent. That was what the pre-Budget report was largely about.
It was an aggressively sectarian set of measures. Labour has identified its "people" - the client state of public sector bureaucrats, operatives and claimants sedulously created by Mr Brown since 1997 - and Monday's main purpose was to protect them. The notion that a piffling £5 billion of "efficiency savings" might be secured out of a total public spend of £680 billion in a couple of years' time said it all.
The raising of the top rate of tax to 45 per cent looks as much a gesture of spite as the two-and-a-half percentage point cut in VAT is a gesture of futility. The tax rise will raise perhaps only £3 billion in revenue, if that: the VAT cut will struggle to be noticed by consumers who are already managing to avoid far larger discounts in most of the shops.
Where it might have made a psychological difference - a few pence off a pint of beer or a packet of cigarettes - the Chancellor has simply raised excise duties to ensure the price stays the same. It wouldn't have done to have had all those toffs going off to Majestic Wine to load up with even cheaper champagne.
There will be a wide suspicion that the 45 per cent rate is simply a staging post to 50 per cent: as it doubtless will be, should Mr Darling's estimates of growth in years to come be as far out as those in the past.