Exhibitors at this week's SOLACE conference may be inclined to hand out free hairshirts to delegates, along with the Biros and goodie bags, following the Darling/Brown CSR announcement on Tuesday afternoon. At least, however, the tightness of the budget round has been well-trailed. There cannot be a chief executive in the land who has not grimly anticipated a difficult budget period ahead and, as usual, councils will rise to the challenge, if only because they have no choice. Unfortunately the confluence of events in the past week has put further pressure on the public finances. First, there has been election and the tax issue.The main reason for calling off an autumn election was that the key marginal seats in London, Midlands and the South East were registering enthusiasm for the Conservatives' inheritance tax and stamp duty plans. Whereas some 7% of properties across the UK fall into the inheritance tax bracket, the figures rises to more than 25% in marginals. An ONS report this week also confirmed that in the past decade, increased taxes, in particular, council tax, have outstripped income rises. As we know, councils have long since abandoned any attempt to introduce council tax rises above 5%. It is not just fear of capping but also of public wrath. If tax is a case of plucking as many feathers from the goose with the least amount of cackling, then in this case, the cackling has become deafening. The message to Mr Brown last week was that middle-class voters had reached the end of their patience. Whatever he does in the next 18 months to two-and-a-half years before the next election, he cannot rely on ‘fiscal drag' to plug his deficits in case he intends to be a one-term PM. As if this were not a sufficient challenge for Darling/ Brown, they also have to operate against a backdrop of a weakening economy, linked to the sub-prime fall-out and a growing public sector deficit. Public sector net debt as a percentage of GDP was up in August 2007 to 36.7% from 36.2% the year before and 29.6% in February 2002. Mr Brown's aim will be to at least curtail the rise by putting the lid on spending on public services. The hairshirts will get an airing for a good while yet. Michael Burton Editor, The MJ
