You have to hand it to Mr Gordon Brown; he is not one for showmanship and theatricality. His budget delivered yesterday to the House of Commons, the first Labour Party budget for eighteen years, could understandably have been dressed up as some momentous package of measures destined to secure British prosperity for a lifetime ahead. Mr Brown resisted the temptation. The budget, in the main, delivered two pre-election pledges and did some tinkering on the margins. Mr Brown may well come to regret his minimalist approach and so might the voters. Mr William Hague criticised the budget because it increased some taxes. His criticism would have been valid had he charged Mr Brown with not raising enough taxes.
The pre-election pledges concerned a windfall tax: and VAT on fuel. The windfall tax is popular and arguably justified. It will take back nearly Pounds 5 billion: sterling from the privatised utilities (mainly the electricity companies) and, judging by the profits they are making, they can afford it. Mr Brown has presumably got contingency plans to stop the companies passing the tax on to customers through higher prices. The spending plans for the tax receipts are even more popular; Pounds 2.3 billion for schools and Pounds 1 billion into the health service - funds put where they are desperately needed.
VAT on domestic fuel is to come down from 8 per cent to 5 per cent in September and Mr Brown expressed disappointment that Brussels would not let him abolish it altogether. His determination, in effect, to encourage fuel consumption through lowering its price sits uneasily with all the green rhetoric from Mr Blair at last week's environment summit. Perhaps the 18p on a gallon of petrol will maintain Labour's shaky green credentials, for the moment.
Neither has Mr Brown too much to worry about with home-owners. The reduction in mortgage interest relief was widely expected as was the increase in stamp duty - still only two per cent on houses worth over Pounds 500,000. Mr Brown is on stickier ground however on pensions. Ending the tax relief for pension funds will directly reduce the value of pensions for many people. And there really was no justification in terminating the tax relief given to pensioners for their health insurance premiums. Mean spirited.
Mr Brown may have had pre-election promises uppermost in his mind when drafting the budget but something else should have taken precedence. The British economy is delicately poised. Consumer spending is running out of control. It threatens to send inflation back up with a vengeance. Mr Brown's decision to shy away from tackling the consumer boom head-on, means that the Bank of England will have to fight the battle on its own through raising interest rates.
An increase in interest rates, which is now inevitable, will send sterling even higher. The corporate sector's enthusiasm for the reduction in company tax may pale soon when British exporters find that sterling strength is losing them orders. And the market's worst fears of Britain sliding back into the classic cycle of soaring inflation and ruinous interest rates have certainly not been assuaged. Mr Brown could do much better next time.