How Budget problem may have been solved

Extract from a conversation between the Prime Minister and the Chancellor of the Exchequer: 10 Downing Street, May 11, 2008 (as imagined by political editor John Hipwood).

Gordon Brown: Hey Alistair, we're in a bloody mess. We've messed up on the 10p tax rate, and we've got to do something before the Crewe and Nantwich by-election next week.

Alistair Darling: Well, to be more accurate, Gordon, you're in a mess. You're the one who abolished the 10p band in order to win a cheer by cutting the basic rate in your last Budget.

GB: Ok. Ok. That was then, and now is now. If we don't act soon, we'll not only lose the by-election but we could be defeated in the Commons on the Finance Bill - and that could cost all of us our jobs.

AD: Well, forget about compensating people through the winter fuel allowance. The easiest way would be by raising personal allowances.

GB: What? Just for the 5.3 million who lost out from the 10p rate?

AD: No, that would be too complicated for HM Revenue & Customs. We'd have to do it for all 22 million basic rate taxpayers.

GB: Brilliant! A straightforward election tax bribe, and an early Christmas present for hard pressed, hard-working families to boot.

AD: It's only May, Gordon.

GB: Yes, but it will be autumn before people start getting their money back. How much will it cost?

AD: Well, it's expensive - about £2.7 billion, and not everyone will get full compensation.

GB: But we can't really afford it?

AD: No, but I'll just lump it on to borrowing for this financial year, and we'll have to work out what we do in 2009-10.

GB: But wasn't that what caused the credit crunch in the first place - irresponsible lending and borrowing?

AD: Yes. But you said it, we're in a mess. It will go down well with Labour backbenchers, and we'll just have to hope that the people of Cheshire don't realise we're only doing it for political reasons.

GB: You're right. We don't have to worry what the Tories, the Lib Dems and the Press will say. As long as we say we've listened to what Labour backbenchers have been telling us, it will be all right. We'll put it to the Cabinet tomorrow followed by a statement to the Commons. There's over a week to go in the by-election campaign. One bound and we're free.