LONDON BRIEFING:WHEN ALISTAIR Darling rises to his feet in the commons today to deliver his first budget, the legacy of his predecessor will loom large, writes FIONA WALSH
Much of his script has already been written for him by Gordon Brown, who unveiled a raft of delayed-drop measures last year, in his final budget before moving on to Number 10 after a ten-year stint at the treasury. And the beleaguered Darling also has the fall-out from his own botched pre-budget report to contend with.
Among the measures previously announced by Brown is a cut in the basic rate of income tax from 22p to 20p in the pound, scrapping of the lower 10p tax rate and a 2p reduction in the main rate of corporation tax. These measures, sprung as a surprise by Brown last year, are due to come into effect in April, although Darling will doubtless present them once again today amid much fanfare.
And fanfare is something the chancellor is rather short of at the moment. His torrid nine-month tenure at the treasury has been dominated by the debacle of Northern Rock, the mounting credit crisis and its knock-on effect on economic growth.
Although he can't be blamed for the global credit crisis, Darling has come under fierce criticism for his dithering over the nationalisation of Northern Rock - and British bookies were taking bets earlier this week on how many times he will be forced to mention the stricken Newcastle-based bank in his budget speech.
The £100 million of Northern Rock liabilities has seen government debt liabilities overshoot the treasury's sustainable investment rule, which states that debt should be no more than 40 per cent of GDP. But the budget report is expected to include two different projections of national debt, one of which will exclude a certain Newcastle-based bank.
Other problems of Darling's making, including his controversial changes to capital gains tax (CGT), and the rules for "non-doms", will also overshadow today's budget package. Darling's pre-budget report, delivered last autumn amid a frenzy of speculation over the snap election that never came, included what the new prime minister and his chancellor hoped would be a package of vote-winning measures. In an effort to woo middle class voters, he hijacked opposition plans to cut inheritance tax and rushed out populist proposals to clamp down on private equity bosses and wealthy foreigners.
As so often happens with rushed measures, there are unintended consequences. Although his CGT changes were aimed at raising the tax-take from the unpopular private equity industry, they had the knock-on effect of penalising small business people. And the imposition of a £30,000 levy on non-doms, many of whom work in the City of London, has proved equally controversial, sparking fears of an exodus of overseas talent and possibly threatening Britain's status as a global financial centre. There may be some watering down of the non-doms measures today, but they will remain substantially in place.
With economic growth slowing, the chancellor has little room for manoeuvre, although that will not stop him unveiling a host of new measures, rather than dwelling on controversial old ones.
In an attempt to secure some favourable headlines, he is expected to put green issues to the fore. While he is widely expected to resist pressure to impose a windfall tax on energy companies, there will be voluntary measures to ease fuel poverty among pensioners and the less well off, as well as measures to cut carbon emissions on cars and increase the use of biofuels. Darling has been under pressure to scrap the 2p a litre rise in fuel duty planned for April, but with his green hat firmly on is expected to resist those calls. Action to help hard-pressed house buyers is also likely, with plans for a new "gold standard" for mortgage-backed securities. Binge drinkers could also see steep rises in alcohol duty aimed at cutting consumption.
Above all, Darling will be hoping that by the time he sits down today he will have gone some way to re-establishing himself as a safe pair of hands in these troubled times, a reputation that has gone the same way as the shareholders' cash at Northern Rock.
He will also want to build bridges with the City of London, which has become increasingly disenchanted with him. That will be some feat - a pre-budget survey this week showed that eight out of 10 in the City think he should go as a result of his handling of Northern Rock, non-doms and CGT issues.
Fiona Walsh writes for the Guardian
