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Q: Chancellor Alistair Darling must relish Budget Day. It's his moment of glory, getting photographed with that famous red briefcase - he suddenly looks like a real man of power and prestige.

A: Actually, he probably feels like a government agent in one of the more perilous moments in Mission Impossible before Tom Cruise arrives to save the day.

Q: Why's that? A: It's a nightmare scenario. Britain's total debt is expected to double in the coming years with Darling facing the biggest deficit since World War II. To stabilise the country's finances he needs to raise tax revenues and cut spending.

But he is also an ambitious Labour politician who wants his party to win the next general election, forecast for next year. He has to somehow come up with a Budget that makes people feel good while taking their money.

Q: Can't he just delay making the tough choices as the Government goes into full-on election mode? A: No, Darling is the captain of a ship that is already in iceberg territory - the economy is predicted to shrink by 3% - and facing credit crunching tidal waves and hurricanes of toxic debt on either side.

As David Kuo, of the internet site The Motley Fool, writes: "The 2009 Budget could be the toughest that any Chancellor will ever have to produce.

There is a gaping hole in the country's finances..

" Alistair Darling, as custodian of the bank account, has to find a to plug that hole. Not bridge it, tiptoe around it, not spin across it, to close it before it gets bigger." It sounds like a hopeless situation will turn his eyebrows grey. Treasury wizards may be able to a cunning plan by which he off the deepest cuts and nastiest hikes until after the election. Does that mean he is going to have find some cash from elsewhere in meantime? There is a suspicion that borrowing jump by another pounds 250bn. Didn't we get into this financial by taking on crazy levels of Surely borrowing so much at a time is at best ironic and at nuts? Expect the Conservatives to say like this. They won't be in sounding alarm bells.

Mervyn King, the grandfatherly of the Bank of England, has warned that the UK is not placed to have another spending Is there any way the Chancellor make people feel good AND do right thing for the economy? David " Danny" Blanchflower, of interest rate- setting Monetary Committee, thinks the should make jobs the priority this is the best way to protect economy and the wealth in our pockets. He has said: "We have a jobs crisis and the Government needs to act quickly. Unemployment is going to rise a lot during 2009... It is probably going to be the biggest issue in the next election." Q: Is anyone going to pay attention to him? A: Cardiff-educated Blanchflower called for interest rate cuts long before the rest of the committee agreed to slash levels to the current unprecedented low. So, when he says that there is a "good chance [unemployment] could go much higher" and calls for greater funding for post-18 education, people will sit up and listen.

Across the UK, youth unemployment is already at a 15-year high.

Prime Minister Gordon Brown has already suggested this will be a employment-boosting Budget, stating: "We will want to help people who are unemployed back into jobs, we will want to give people the skills for the future so they can get the jobs of the future." Q: How will the Budget directly affect Wales? A: Finances in Cardiff Bay are already tight but it is feared that further demands for efficiency savings will have a thumbscrew effect.

If savings have to be made in areas where the Assembly Government has responsibility (such as health and education) less money will be transferred from London to Wales.

But if some of the savings come from departments such as defence and the

Department for Wo Wales will take les In an absolute wo the Assembly Gove up losing pounds 500m.

Its existing Budge pounds 16bn - around 4% spends on its defen The Scottish Gove Northern Ireland E thoroughly unhapp prospect of similar recession.

Q: Are Assembly M arms? A: Yes. The Libera Randerson argues: matters massively needs more fundin particularly for the economy. Now is no cutting central bud services." Plaid Cymru wan package worth app for Wales which it "create and save 40 now and 2011".

Q: Is there anythin cheer us up so we t half-full? A: The British Beer Association thinks recession is claimin and is loudly callin escalator", which i the beer tax of 2% be axed.

Q: Does an army of brewers stand a ch ork and Pensions, s of a financial hit.

orst-case scenario, ernment could end et is approximately % of what the US nce forces.

ernment and the Executive are also py about the r cuts at a time of Members up in l Democrats' Jenny "The Budget because Wales ng for education and e stimulation of the ot the time to be dgets for core nts a stimulus proximately pounds 3bn believes would 0,000 jobs between ng Darling can do to think the glass is r and Pub so! It warns the ng six pubs a day ng for the "duty imposes a rise in above inflation, to f landlords and hance of getting a

Chancellor to do anything which would (a) reduce the tax take and (b) encourage us to drink more? A: Nearly a third of MPs - many of whom are worried about keeping their seats in the next election - have already pledged support to keep their local pub open. Just as the fight to keep post offices open was one of the great campaigning issues of the past year, the battle for the pub is a now a mighty popular cause.

Even if the Chancellor refuses to do a U-turn on the duty escalator, he may have to do something to pacify these passionate campaigners.

Q: I think I'd rather put my spare cash somewhere safe than blow it on an expensive round of local ales.

A: The collapse in interest rates has been bad news for savers, with many accounts offering a piddling incentive to save. The Chancellor would win a loud "Hurrah!" in the Commons if he announced a significant increase in the tax-free ISA allowance.

Q: What about cigarettes? That's a sure-fire way for the Treasury to raise some revenue.

A: An inflation-only rise would add 11p to a packet of 20 cigarettes.

Simon Clark, director of pro-smoking group Forest, said: "Our concern is that because they've got to fill this huge black hole in the public finances they will pick on so-called 'sin' activities such as smoking and drinking." Anti-smoking lobbyist group Ash is hoping for a tax increase which will discourage people from lighting up..

Q: It's obvious Darling lacks the wriggle room needed to raise revenue or cut taxes in a significant way, but does he have any other tricks up his sleeve? A: Analysts at Baker Tilly expect him to clamp down on the loopholes and other hijinks canny businesses have used to avoid paying the full tax whack in the past.

They predict he will wield a big stick on Budget Day, promising to crack down on tax avoiders and even raise the possibility of reforming our taxation system.

Q: Will he hike VAT back up to 17.5% again on January 1 so we have to pay 70p for a 69p bottle of water? A: The cut in VAT to 15% was derided by the opposition but it is likely to stay in place for a while longer.

Retailers have lobbied against a VAT change at the very moment they hope to be in the throes of the New Year sales.

But in the long term, a major rise in VAT would be one way of refilling the Treasury's coffers.

Q: Could we see a hike in National Insurance? Or even an increase in the top-rate of income tax? A: The super-rich are not particularly popular at the moment, and the prospect of squeezing affluent bankers might cheer up red tie-wearing backbenchers, but the Chancellor is unlikely to do anything to make Britain a less enticing place for the financial industry.

Short of a Lazarus-like resurrection of the motor industry, the City will remain the dynamo of Britain's economy.

Q: Talking of automobiles, isn't Darling expected to announce a "car scrappage scheme"? A: It is anticipated car-owners will be offered a pounds 2,000 to pounds 5,000 incentive to trade-up to a greener model. This could inject some sparkle into the automotive sector (perhaps to the chagrin of other industries which would appreciate a subsidy), help cut carbon emissions and give the electorate the fun of a new steering wheel.

Such a scheme was a tremendous success in Germany, where monthly car sales jumped 40%. As Wales is a major supplier of car components, it could have helpful knock-on effects here.

Q: What would the Tories do if they were in power? A: Cut spending. Shadow Chancellor George Osborne has made it clear he doesn't believe in tax rises.

In an interview he said: "I've mentally adjusted myself and David Cameron has mentally adjusted himself to the fact that we are going to have to take some very difficult decisions for the good of the country." Q: It is not an easy time to be Chancellor, is it? A: No. If it all goes wrong, Darling and Brown will go down in history as the men who bankrupted Britain.

But if they can calm the economic storm, they might just be seen as a pair of miracle makers..

CAPTION(S):

This Wednesday is Budget Day and the Chancellor of the Exchequer will face baying MPs, a sceptical public and the greatest challenge of his career. DAVID WILLIAMSON goes in search of the rabbits Alistair Darling will pull out of his hat WalesOnline.co.uk Keep right up to date with the budget news and debate as it happens on WalesOnline.co.uk CLICK ON
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Publication:Wales On Sunday (Cardiff, Wales)
Geographic Code:4EUUK
Date:Apr 19, 2009
Words:1694
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