Today, Alistair Darling is widely expected to unveil a Budget for jobs the jobs of Gordon Brown and the rest of the Labour Government. Budgets are always highly political. This one comes just six weeks before a likely general election.
But Mr Darling is odds-on to lose his job after that election, even if Labour wins. That has put him in a strong position to deliver a Budget for economic rather than political recovery.
His position has been strengthened further by the slight improvement in the still dire outlook for the public finances this year. That will allow him to use some of the improvement to fund modest giveaways sorry, targeted investments and show prudence by banking the rest.
He will make great play of plans to put money into green energy and infrastructure projects and to set up a National Investment Corporation. But the sums involved will be trivial in relation to the scale of the problems. There is likely to be other modest help for business. He may even spike the Tories guns by cutting corporation tax, perhaps funded by reductions in allowances. Further increases in personal tax for the wealthy are not impossible, but changes to capital gains tax seem unlikely.
Related LinksBusiness Editors budget briefingIts a sculpture, not just figuresWhat the voters really deserve and what the financial markets really crave is more detail on how a re-elected Labour Government would meet its deficit reduction plan. This plan requires very significant cuts in public spending, in areas other than schools and hospitals which have been ringfenced.
Mr Darling needs to flesh out these plans so there can be a proper debate in the election campaign about the tough choices facing the country. If he does that today, Mr Darling may preserve his reputation, if not his job.
Another lesson for Prudential
The unspoken message in Legal & Generals cheering results yesterday is that it is perfectly possible to make decent returns in the pensions and investments market without embarking on a costly, ambitious Asian adventure. Just as with Standard Life the other day, the message was: Up yours, Prudential!
Instead of tapping shareholders for oodles of loot, like the Pru, L&G is paying it back out, lifting the interim dividend by a hefty 33 per cent.
L&Gs policy of adjusting the product mix to those with quicker payback times and cutting costs is paying off. It beat its target for cost reduction by 19 million and its target for cash generation by 250 million.
It had some luck. The blowout in corporate bond spreads last year enabled it to lock into investments at supremely favourable prices which produced a one-off 100 million boost for its annuities business. The dramatic bounce in equities has been good news, too.
The dividend rise is less spectacular than it looks, however. L&G cut the final dividend last year by 50 per cent and the interim payment six months ago by 45 per cent.
The total for 2009 is still down on 2008, which is down on the year before. The decision to cut so sharply now looks to have been too cautious, but understandable, given the fear and loathing at the time.
L&G is not without international ambition. It has struck some serviceable joint ventures with foreign banks its preferred channel for selling its savings products. And it is not averse to starting from scratch small experimental ventures overseas. But a Pru-style land grab is out.
In share-price terms, theres not been much to separate the two companies: neither has made any progress since 1997. Given their divergent strategies, however, it is highly unlikely that they will travel the same path in the next 13 years.
L&G chief executive Tim Breedons apparent success from sticking to the knitting will not make it any easier for the Prus Tidjane Thiam, as he prepares to sell his very different strategy to a still sceptical City.
Finances out of this world
If Britain is serious about diversifying its economy away from financial services and creating high-tech manufacturing jobs, the space industry is an obvious place to start.
As I have said before, space is an unsung champion of the British economy, contributing about 7 billion a year and supporting more than 68,000 jobs. But it could be so much more. A recent government-sponsored report forecast that space could be worth 40 billion a year to the UK by 2025 if steps are taken now to fire up the engines. So we should applaud Lord Mandelsons move yesterday to establish a standalone agency to manage all of the Governments civilian space efforts. The Government has also set up working groups to look at how it spends money on space projects.
The big uncertainty is what the Conservatives will make of it all. The Tories might want to spike a Labour project if they get into office, but a better strategy would be to grab the map that has been laid out for space and take the credit when the mission is accomplished.
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