FactCheck: budget 2009
Updated on 22 April 2009
Chancellor Alistair Darling's second budget was a gloomy affair full of eye-wateringly large figures, but did he crunch the numbers correctly? FactCheck finds out.
The claim
"The UK went into this global recession with employment at an all-time high, inflation, public debt and interest rates at low levels."
Alistair Darling, chancellor of the exchequer, budget speech, 22 April 2009.
The analysis
Sounds like the opposite of the message we hear from the Tories: that the government failed to fix the roof while the sun was shining. Who's right?
Although the dole queues are now shooting up, high employment has been one of Labour's success stories.
The all-time high claim is true on a headcount basis: the number of people in work has increased fairly steadily, with around three million more people in work than when Labour came to power.
But if we look at the UK's employment rate (a more useful measure in the context of the wider economy), it's a less clear picture.
The employment rate for adults of working age reached its most recent high, 74.8 per cent, in the last quarter of 2007. Slightly lower than the 75.7 per cent overall in 1973, and the 75.8 per cent in 1974; and the three consecutive quarters at 75 per cent in 1989 and 1990; and even the 74.9 per cent Labour achieved in the first quarter of 2005. So a secure high, if not necessarily an all-time high.
The chancellor's broadly right on inflation and interest rates, which we've looked at in more historical detail here and here.
Before borrowing spiralled into the three-figure billions, and Northern Rock became the first of a slew of banks to be added to the national balance sheet, public sector net debt (as measured by the ONS) was indeed fairly low: 36.6 per cent of GDP in 2006-7.
This compares to 43.3 per cent in 1996-7, though it's up from the 30.3 per cent low Labour reached in 2001-2.
Whether it should have been lower is a matter of political debate, if not cause for a another FactCheck altogether.
Sources
FactCheck: do we owe a debt of gratitude to Gordon Brown?
Office of National Statistics
The claim
"And my forecast for GDP growth for the year as a whole will be -3.5 per cent - in line with other independent forecasts ... Next year, because of the pick-up in world demand, the continuing benefit of lower prices, and the substantial recovery measures put in place, I am forecasting growth of 1 ¼ per cent in 2010."
Alistair Darling, chancellor of the exchequer, budget speech, 22 April 2009
The analysis
Forecasting is a tricky business, as the chancellor should know only too well. Just 13 months ago, the 2008 budget painted a far rosier picture than that we see today.
But as he says, his forecast for growth this year isn't out of line with that of independent forecasters. According to the summary published this month by the Treasury, they averaged a forecast of -3.7 per cent growth, (ranging from -1.3 to -4.5 per cent).
And 2010? The government's forecast is almost a percentage point more optimistic than the independent average.
The consensus is an average 0.3 per cent growth, with forecasts ranging from -1.2 to 2.5 per cent. It's too early to say who will be right, but if the government has been overly optimistic, it will face an even bigger future budget hole.
Sources
Treasury: Forecasts for the UK economy April 2009
The claim
"The IMF forecasts published today confirm the problems that all countries will face this year. But they also show the British economy will suffer less than Germany, less than Japan, less than Italy, and less than the euro area as a whole this year."
Alistair Darling, chancellor of the exchequer, budget speech, 22 April 2009
The analysis
In its monthly forecast, the International Monetary Fund (IMF) today predicted the global economy would shrink by 1.3 per cent in 2009.
The IMF predicted Britain's GDP will decrease by 4.1 per cent in 2009. Indeed, not as bad as: Germany (5.6 per cent), Japan (6.2), Italy (4.4) and the Euro Area (4.2).
While this year's projections might yet be revised, the key is perhaps to look at the IMF projections in the long-term, not just for "this year". They show that in 2010, of the countries mentioned by Darling, only Germany - with its bigger manufacturing industry - will still be worse off.
It's also worth mentioning that at the start of the year the IMF said the UK would be "worst hit" by the recession in the long-term.
While the US, whose sub-prime mortgages are often blamed by both Brown and Darling for causing of the economic downturn, will also out-perform the UK both this year and next, according to the IMF today.
Sources
IMF projections
The Guardian: UK to be worst hit says IMF
The claim
"The Government is determined to eradicate child poverty."
Alistair Darling, chancellor of the exchequer, budget speech, 22 April 2009
The analysis
Determined it may be, but this budget provides little evidence the government will meet its target of halving child poverty by 2010, let alone wiping it out completely.
In 1999, Tony Blair promised to end child poverty within a generation. But despite early progress, things have slipped slightly in recent years.
The Joseph Rowntree Foundation has estimated an extra £4.2bn is needed to take the 600,000 children out poverty that would be needed to meet the 2010 target. This equates to roughly a £12.50 a week tax credit increase.
Darling today announced a £20 annual increase in the child element of the child tax credit - still around £600 a year each short.
Sources
JRF: Ending child poverty in a changing economy
The claim
"And by the way, he's just broken a manifesto promise not to put up the top rate of tax."
David Cameron, Conservative leader, response to the budget, 22 April 2009
The analysis
Here's the black and white from the 2005 Labour manifesto: "We will not raise the basic or top rates of income tax in the next parliament".
But in the world of politics, a promise is rarely as clear-cut as it seems.
Let's compare this with what Darling said today, when he promised to tax incomes over £150,000 a year at 50 per cent, rather than the 45 per cent he'd announced in November, or the 40 per cent these rich folk currently pay.
"In November, I announced a new rate of income tax of 45 per cent on incomes above £150,000 - the top one per cent of taxpayers.
"In order to help pay for additional support for people now, I have decided that the new rate will be 50 per cent, and will come in from next April - a year earlier."
If we were heading to manifesto court, Darling's lawyers could argue that he's not, technically, increasing the current top rate of tax, which affects everyone on an income of more than around £41,000; rather adding an extra rate on top of that.
It may make it past the judge, although whether a voter would give him the benefit of the doubt seems far sketchier (admittedly the new rate will only affect a fraction of voters).
There's another possible side to Darling's defence: the new tax rate is due to kick in in April 2010. There's nothing to stop the government calling an election, and ending the parliament, before it kicks in.
It's a technicality of the type they used in the last parliament to avoid breaking a manifesto commitment not to bring in top-up fees. With Labour currently trailing in the polls, an early election seems unlikely, but this is still far from certain.
Sources
Labour manifesto 2005
Pre-budget report 2008
