Formulation of the Budget

Normally, the formulation of the Budget is an ongoing process that continues throughout the year. Labour's first Budget will deviate from this path given that it is happening outside the normal timetable of events. We will take a look at how Labour's first Budget since 1979 has taken shape, before looking at the possible changes to the Budget timetaable in the future.

The Labour Budget

However, given Mr Brown's flair for bold policy changes early on and the fact that the Budget is coming at the end of the stated time-frame (the manifesto stated within two months of the election), there are strong reasons to suspect that the measures announced will go further than originally intended and this working title has generally been dropped.

The welfare to work programme was first touted by the shadow employment secretary, Chris Smith, in 1995 and a consultation document was published in the same year. It was seen as central to Labour's strategy of tackling long term unemployment and pressure groups were warm about the idea, although even now most are reluctant to offer their whole-hearted endorsement until the finer details are presented.

The proposal to reduce VAT on fuel to the lowest level allowed under EU law stems from Labour's opposition to its introduction, first announced by Kenneth Clarke in November 1993. It was Labour's opposition combined with a handful of Conservative rebels that forced Kenneth Clarke to abandon the second rise in VAT (intended to be from 8% to the standard rate of 17.5%).

With the Chancellor looking to take a bolder approach, pressure groups, industry bodies and academics have all offered their Budget proposals to the Chancellor. These relate more to possible changes in taxation, given that the Chancellor has committed himself to the departmental spending plans announced in the last Budget by Kenneth Clarke for the next two years. Whilst the spending round is on hold though, a review of all government spending will take place.

Possible Changes

Critics (such as former Conservative Chancellor Nigel Lawson) point out that finalising tax decisions four months before the end of the financial year leaves a greater risk that circumstances will change on spending or borrowing before the plans come into effect. Furthermore, a cumbersome amount of work is placed on the Chancellor and the Treasury team in the run up to the unified presentation.

Gordon Brown has made no formal announcement on the possibility of reverting to the old split between the spending and taxation announcements, but many are suspecting that the Chancellor could move back to a March Budget, meaning that the July Budget could be the first and last of 1997.