Budget Week Part I: What The Heck Is A Budget?

Afternoon all!

It's the political event of the year/month/nanosecond, and it's happening on Wednesday when Mr Alistair Darling finds that lunchbox he hasn't used since Year 4...

"My mummy says I'm a good boy!"

Ahem... and gives his Pre-Election Budget. But what exactly is a budget?

Well, to keep it simple to begin with, a budget is basically a list of all known incomes (money you receive from others) and expenditures (money you give to others). Most people can come up with a personal budget, because it's relatively easy to come up with a list of what you're spending.

The difficulty is addressing a budget deficit: for example, if I have £1000 to spend over six months, and I spend £700 in the first three months, I would clearly need to evaluate my budget in order to stop myself running into debt. This might reducing my expenditure (eg not spending £70 on beer every month, or reducing my food bill from £20 a week to £15 a week, and so on), which is annoying, but necessary: or it could mean finding myself a job in order to raise revenue.

And with a government, it's a similar story. In the case of the Labour Government, too much money has been spent, and not enough revenue has been created. So how can it get rid of the accumulated debt? Answer - draw up a new budget.

However, it's a tricky thing to do right. In order to raise revenue, which is one way of solving the problem, the Government can put up taxes: income tax, VAT, fuel tax, duties, levies, and the like. But that doesn't usually go down well with the public. So the alternative is to decrease expenses, such as spending on education, health and transport: but that goes against what Labour's been doing over the past 13 years. So Chancellor Darling has to get the balance right: raise taxes too high and he'll risk upsetting the public; cut spending too little and he'll be accused of not doing enough to halt the deficit; cut spending too much and he'll be seen as betraying New Labour. It's a toughie.

As you can see, it's not the economic impact that's important with a pre-election budget: it's how the country responds to it, and also how the Opposition responds. If Cameron can conclusively show that his economic policy is better, he'll be home and dry. If not, hung parliament methinks.

The slightly sad case is that, regardless of what Darling does, he's going to be out of a job come May. Even if Brown does win, he and Darling do not get on, and it is likely that Ed Balls will replace the oddly-eyebrowed political veteran at No. 11 if Labour do manage to hold on. So he's damned if he does a good enough job to get Labour in, and damned if he doesn't.

For now, all Darling's saying is that there won't be any giveaways: but that seems to be at odds with No. 10. It'll be interesting to see who comes out on top in that one.

More tomorrow! Oh, and two people are expecting a baby. Which wouldn't necessarily be big political news...

Chris