Budget 2008: Darling’s Budget ‘downplayed economic risk’
Alistair Darling’s Budget may have given “insufficient weight” to the risks of continued financial market turbulence in making forecasts for economic growth, a report by the House of Commons Treasury committee has claimed.
The committee said the margin by which the government forecast that it will meet the sustainable investment rule is “extremely tight”, especially considering the current economic uncertainty.
Chairman of the committee, John McFall, said: “The Treasury’s forecast of economic growth in the next two years is more optimistic than the consensus view.
“Critical to this forecast is the resilience of the UK economy to shocks. Some of the very things that have kept our economy growing over the last decade may start to cause us problems, and the 2008 Budget may not have recognised this fully.”
In its report the committee also called on the government to make clear that the necessary resources to meet its target of halving child poverty by 2010-11 were available and that they were directed towards low-income families.
There was also criticism of the abolition of the 10 pence rate of income tax to fund the benefits of tax simplification and meet the needs of children in poverty.
The report claims that mains losers from the removal of the starting rate will be those with an income of under £18,500, under-65 and in childless households.
“While tax simplification is a laudable aim, it seems strange that the abolition of the 10 pence starting rate of income tax, disadvantages mainly low income households,” Mr McFall said.
“As such, the government must ensure that these people are identified, and appropriate help given to them to ensure they receive the benefits to which they are entitled.”
The controversial plans to tax wealthy non-domiciles also came in for criticism from the Treasury committee.
“There has been too much focus on the very wealthy non-doms, and almost no notice taken of the low and middle income groups who will be affected by the changes.
“We have highlighted a serious risk that HM Revenue and Customs will be faced with the problems of potentially millions of foreign workers, either seeking advice or unwittingly in breach of the new law.”
Chancellor of the exchequer Alistair Darling delivered his first ever budget to the Commons on March 12th.
Conservative leader David Cameron criticised it at the time for being “a dire list of reviews and reannouncements”.
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