Brown keeps options open in pre-Budget statement

A pack of 20 cigarettes will cost 19p more from Monday. But it has nothing to do with what Chancellor Gordon Brown said in his “pre-Budget” statement yesterday. It is in fact the hangover from his first “real” budget in July.

The much vaunted statement – heralded as both a forward-looking assessment of what the full Budget may look like next March and an opportunity to consult on the shape of future macro-economic policy – proved to be more interesting for its novelty value than for what Brown actually said.

There was little advance warning of any shocks in March – which is essentially what people were looking out for – while the detail and form of consultation was not disclosed.

Details on consultation over new individual savings accounts, dubbed “son of PEPs” which are to be introduced in April 1999, will be revealed next Tuesday; the oil, alcohol and tobacco industries will be encouraged to consult on a “fair and open approach to taxation”; charities will get the same treatment, although any review will not get under way until next spring; corporation tax will be cut to 30p in April 1999 while advanced corporation tax will be abolished at the same time.

The Chancellor maintained a free rein on taxation. Company cars, which had been expected to be attacked, survived to fight another day but that may only be a stay of execution. “We are also looking at how the tax system can reflect our environmental object-ives,” Brown told the House of Commons. Inevitably there will be environmental taxes revealed in March and much of the consul-tation will be on the level at which they will be raised and how it will be done.

The lack of specific tax hikes is designed to stop people going out and stocking up between now and March, thereby overheating the economy.

It means the happiest people at Westminster yesterday were probably the lobbyists anticipating a surge in business created by the consultation frenzy.

“It is obviously a pointer to next March’s Budget and all of us will be looking at the detail to see if there are aspects we can assist our existing clients with or if there are new business opportunities,” says one. “The lack of specifics on taxation – always an area of intense pre-Budget lobbying – seems to suggest that airline tax, insurance premium tax and others are still open to debate.”

It was a statement for the young and old. It gave money to pensioners so they can fend off the winter cold, and promised 300m to create 30,000 after-schools-clubs (which may seek commercial sponsors) for as many as one million children in order to improve child care. He also restated previous promises to the unemployed.

Officially, the pre-Budget statement was an exercise in open Government, but much of it had been said before. Brown’s predecessor Kenneth Clarke dubbed it a publicity exercise. It is difficult to disagree.

New Deal Analysis, page 19