Chancellor Alistair Darling today remained resolute in his confidence for economic recovery among a despondent audience at the Institute of Directors (IoD) convention, defending his widely-mocked Budget forecasts and the 50% increase in income tax for top earners.
Darling had perhaps been bouyed by the blazing morning sunshine outside the Royal Albert Hall that greeted some of the UK's top business leaders, insisting any negativity around the economy should be tempered by optimism for the future.
“I’m seeing extraordinary resilience and determination. When you consider world trade has gone down by over half in the last few months and Germany has seen its industrial production down by 20%, it really brings home the scale of what is happening.
“We’ve seen unemployment go up and yet it’s worth bearing in mind the majority of people who lose their jobs get back into work in a few weeks. There are underlying strengths we will need to build upon.
“We’ve got to understand before we can cure the problem, what the cause was.”
When it came to the cause, Darling was quick to remove blame from the government and lay it firmly at door of the banks.
“The banks overstretched themselves and they overstretched in many countries as well. That’s why we and other countries had to intervene to ensure we had the banking system back and functioning. Without an effective banking system there cannot be an effective economy – if you don’t fix the banking system, you can’t fix the economy.
He went as far as claiming the banking collapse was a situation the government couldn’t have foreseen:
“If, 12 months ago I had stood here and told you we would own four banks, people would think, surely not.
Shifting focus back to recovery, Darling underlined his belief that last week’s Budget was a positive one for business. A bold move among clear doubters:
“I wanted to help people get through this difficult time, I wanted to ensure that we helped businesses. That’s why we introduced the time to pay scheme which has helped 100,000 businesses.
“The second part of what I wanted to do is important as well... the consequence of this downturn is very obvious. If banks aren’t making profits, it has an adverse consequence of what happens in terms of revenue.
Pre-empting expected questioning of the 50% income tax hike, Darling outlined the message that Britain must ‘live within its means’ – and that meant not just cuts in public spending but also tax rises. Something he was resolutely unapologetic about:
“No chancellor wants to raise tax if they can avoid it... but at times like this it’s necessary. Sometimes you do have to make difficult decisions. We needed to send a clear message out to the country. We need to be able to raise revenue from taxes. It’s not unreasonable to see people who have seen big increases in incomes over the past few years to shoulder some of the blame. I can’t see how it’s logical not to expect that.”
Darling also defended his forecast figures, insisting they were realistic and justified.
“Forecasting is incredibly difficult... but where I think there are grounds for more confidence is the £20m we’ve put into economy, interest rates remain low, the extra funding the Bank of England has put in, the investment from other countries, it makes me believe we do have a good future.
“I have a vision of a strong prosperous country – a strong, prosperous, successful country where Britain remains a strong place to do business.”
And there we go. We’re on the road to recovery. We’re not sure the IoD crowd were that convinced – are you?