Britain's recent history suggests that there are only two types of pre-election budget: naked attempts to bribe taxpayers with their own money and determined shows of fiscal rectitude. By and large, Conservative chancellors have fallen into the first category, while Labour occupants of 11 Downing Street have been more willing to don the hair shirt, often to their electoral cost.
The spectre of Roy Jenkins in 1970 hangs over Alistair Darling as he prepares to deliver his third budget on Wednesday. With inflation a problem and the International Monetary Fund hovering menacingly, Jenkins eschewed the expected tax cuts and, in language Darling would appreciate, warned: "There are dangers for the country in the present situation." For decades, Jenkins remained adamant that it had not been his frugality that allowed Ted Heath to triumph unexpectedly at the polls two months later.
Hugh Gaitskell's package of 1951 was another exercise in austerity. Labour had seen its majority from the 1945 landslide trimmed in the poll held in 1950 and another election was in the offing. Gaitskell increased income tax, profits tax, purchase tax and petrol prices. Even more controversially, NHS patients were charged 50% of the cost of spectacles and dentures, a move that led to the high-profile resignations of Aneurin Bevan and Harold Wilson.Labour was removed from power later that year, and a quite different approach was taken by the Conservative chancellors in the pre-election budgets of 1955 and 1959. R A "Rab" Butler shaved 2.5p off the standard rate of income tax in April 1955, and just over a penny off the lower rates. Tax allowances were raised and purchase tax on some items was cut. The Tories were returned to power with an increased majority the next month. It was a similar story in 1959 under a different Conservative chancellor, Derick Heathcoat-Amory. He was even more generous than Butler, lopping 4p off the standard rate of income tax and 2.5p off the lower rates. Purchase tax was reduced and duty on beer was trimmed by almost 1p a pint. The Conservatives won a 100-seat majority that autumn.What the Conservatives managed to do in the 1950s was to align the economic and political cycles. Pre-election giveaways were followed by post-election takeaways as successive chancellors made sure that any bad news occurred early in the parliament. It was a strategy to which the Conservatives returned during their next period of prolonged rule after 1979.
Geoffrey Howe's reputation as an iron chancellor is based on the 1981 budget, which raised taxes even though the economy was in the depths of what was – then, at least – Britain's longest and deepest postwar slump. But in the spring of 1983 the economy was growing strongly and Howe was able to let the brakes off. Income tax allowances were raised by more than the rate of inflation, tax relief on mortgages was increased from £25,000 to £30,000, and child benefit was raised by 11%. With Labour in disarray and Thatcher benefiting from a Falklands feelgood factor, the Tories were back with a majority of 144 within three months.
Nigel Lawson produced an even more striking package of tax cuts four years later. Petrol duty on unleaded petrol was cut by 5p a gallon, on-course betting duty was scrapped, corporation tax for small companies was reduced and tax exemptions for profit-related pay were made more generous. But the centrepiece of the budget was the announcement that the basic rate of income tax would be cut from 29% to 27%, with a clear hint that voters would see a similar reduction the following year provided they resisted the temptation to vote for Neil Kinnock's Labour party.They duly did, were duly rewarded and, in due course, paid a heavy price. Tax cuts and lower interest rates helped to stoke a ferocious consumer boom in 1988 that could only be controlled by a doubling of borrowing costs. The economy sank into recession in the autumn of 1990 and was still in the doldrums as the end of the parliament approached in early 1992.As now, the public finances were in a terrible mess, but with some creative accountancy at the Treasury, new chancellor Norman Lamont massaged down the size of the projected deficit to £28bn. Although the black hole later proved to be substantially bigger, he was able to cut taxes by introducing a new 20% tax band on the first £2,000 of taxable income. The following day John Major fired the gun for the start of an election campaign dominated by tax. Against the odds, the Conservatives won a fourth term.Kenneth Clarke was less successful with the last budget before the 1997 election. He cut income tax from 24% to 23%, but after the hefty increases in taxes in 1993 and 1994 it was too little too late. The last Budget of 18 years of Conservative hegemony also bequeathed some eye-wateringly tough targets for public spending which Gordon Brown stuck to when he became chancellor under Tony Blair. Clarke later said he would never have adhered to them himself.Brown's pre-election Budgets of 2001 and 2005 tended to produce something for everyone without being memorable. In 2001, Brown announced higher pensions and more generous tax credits for the working poor. In 2005, he announced extra long-term spending in public services, setting up an election campaign based on Labour investment versus Conservative cuts.
Advance billing suggests this week's budget will not be Lamont in 1992 or Lawson in 1987, let alone Lloyd George in 1909, perhaps the most memorable pre-election budget of all. The then Liberal chancellor outraged the House of Lords, prompting a constitutional crisis and an election, with a tax on land to pay for the embryonic welfare state. Lloyd George called it a "war budget" – raising money to "wage implacable warfare against poverty and squalidness". Darling insists he has no intention of coming up with anything nearly so emotive.
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