Giant borrowing payback looms
- 21 Nov 08, 08:05 PM
The government is preparing to admit that a huge and unplanned-for rise in government borrowing will have to be paid back in the years to come. The chancellor is expected to announce spending rises and tax cuts to boost the economy in his pre-Budget report on Monday but he'll also make clear how the money he spends will have to be paid back.
Next week, the chancellor has to tell the country how far we've gone into the red. He's preparing to reveal that we'll soon be borrowing over £100bn - that's 11 noughts at the end.
A collapse in the tax the government receives from house sales and from the City of London means we're heading for an annual overdraft worth one twelfth of the country's annual income - a figure that will raise a few eyebrows. It's not been seen since Denis Healey was Chancellor - back in the 1970s - the last time Labour was in power.
I'm told that Alistair Darling wants people who watch his speech to clearly understand how he'll reduce the nation's overdraft without having to read the small print.
The last time a chancellor had to give advance warning of tax rises was under the Tories in 1993. Norman Lamont announced plans to put VAT on gas and electricity bills one year and double it a year later. It caused Labour outrage. Gordon Brown was sitting on the front bench that day.
Today Mr Brown faces opposition taunts that he's planning a tax bombshell. He insists that however high borrowing is already, it's got to go even higher, telling Jeremy Vine on BBC Radio 2 that "You have got to act now so that we avoid a worse problem.
"My father used to say 'a stitch in time saves nine' and I think that's an important message."
The prime minister was also asked the question he's always fudged - whether he regretted his promise to end boom and bust.
"Of course politicians make mistakes, and I've got to be honest that we've made mistakes."
It's Alistair Darling who has the job of undoing some of those mistakes - on Monday he has to be honest about the long term pain we face while promising enough short term gains to stop the country sliding into a slump.
The Treasury's talking about a package of measures that will be "decisive". That means a stimulus - paid for by extra borrowing - of more than 1% of national income GDP - over £15bn to be spent on:
Cancelling planned tax rises - on cars, small business and income tax allowances
Temporary tax cuts - targeted at those most likely to spend the money - the lower paid
And increased spending - on projects that can be started quickly.
It's often said that chancellors' speeches are forgotten a few days after they're delivered. This one looks like proving to be an exception.
