Get the bad Budget news out as soon as possible
Bad news comes late, early news is good. We should be worried therefore that there is talk of delaying the UK Budget until April.
Barclays proved the adage about early news when it revealed its key financial statistics and brought forward its 2008 results, ending the long decline in its share price. Indeed, the shares have almost doubled.
Yet the Treasury is warning that the Budget may have to be held later than usual because of a meeting of G20 countries’ finance ministers in mid-March and a full G20 summit in London in early April that will be attended by the new US president.
There are two components to UK Budgets – the economic and financial forecasts, and specific fiscal measures. Frankly it does not matter greatly if the forecasts are delayed – extra time might even make them more accurate – but they are going to be dreadful whenever they come. And if Alistair Darling is hoping that G20 summit will allow a last-minute positive revision of his figures he should stop fooling himself.
There is a convenience in announcing changes in taxes such as income tax – whether rates, thresholds or allowances – before the start of the fiscal year, however. It allows employers as well as workers to get their sums sorted out before the tax period begins.
That said, March budgets are a modern convention. In the quarter century from the end of the second world war to 1970 only two Budgets were held in March, the rest in April or even (after a March general election) in May. From 1980 to 1993 March Budgets became the norm, and have been since 1998 – though Gordon Brown made his annual statement in April in 2002 and 2003.
However, the main reason they have got earlier is that it gets the money into Treasury coffers sooner. Raising taxes on fuel, drink and cigarettes in March gives an extra month of increased income.
This year the chancellor has a quandary: on the one hand he needs every penny of taxes to balance his books, on the other he is supposed to be leaving the taxpayer with money to spend to revive the economy.
If he has any bold measures to curb the recession – above the many that have already been announced – then the sooner the Budget is announced, the better. If they look that good, the other G20 countries can adopt them. But the longer Darling delays, the more people will assume the forecasts are bad and that he has no big idea.
