As we hurtle towards the general election it appear that a day doesn’t go by now without a key business leader or hugely influential economist coming out and pours scorn of the governments economic policy.

The latest is none other than Sir Richard Branson, who in an interview this morning, saying “I believe the UK’s record budget deficit does pose a serious risk to our recovery. It would be deeply damaging to Britain if we lost the confidence of the global financial markets through delayed action and saw interest rates have to go up steeply.” continue reading

Following a series of Freedom of Information requests, the Conservatives have unearthed evidence of how Labour Special Advisers have used Civil Service resources to make party political attacks, in breach of Whitehall rules.

The new documents show how civil servants have been instructed by Special Advisers to produce attack material to be used in the media against the Conservative Party.

Whitehall rules prohibit government resources being used for Party political purposes, this is outline in the Code of Conduct for Special Advisers, which states: continue reading

The Chancellor wanted to do more to tackle the UK’s ballooning deficit but was overruled by the Prime Minister, according to reports.

Alistair Darling originally came up with “tougher” measures for this week’s pre-Budget Report (PBR) to start making inroads into the £178 billion of public borrowing needed this year, according to the BBC.

But with an eye on the election, Gordon Brown stepped in to maintain a multibillion-pound spending boost to protect frontline services like schools and the NHS.

According to the Guardian, the Treasury wanted to raise the VAT rate above 17.5% next month – a move that could have raised billions for the public coffers.

But Mr Brown and his allies opted instead for a later hike in national insurance, the paper said, fearing the VAT rise would hamper any economic recovery.

A Treasury official told the Guardian: “Ministers look across the range of options and it is no surprise that other ways of revenues were being examined.”

Defending the PBR and the measures taken by Mr Darling, David Blunkett said that the Treasury sources should to be ashamed of themselves if Britain’s credit rating is effected – he added that the government aim to halve it in four years was ambitious, but had to be done.

“If any of these so-called sources… from the Treasury undermine our credit rating… they ought to be ashamed by themselves,” he said.

He added that a longer term view was needed on the deficit, noting that it was “not until 2002 that this Labour government paid off the debt from the second world war” and backed the scale of borrowing saying “if the roof’s taken off your house you take a mortgage out to put it back on”.

In Wednesday’s PBR, Mr Darling predicted borrowing costs would increase this year to £178 billion – up from a previous estimate of £175 billion. He pledged to halve the deficit over the next four years in an “orderly way” that would not threaten the recovery.

On Thursday, Mr Darling was warned by the influential think tank the Institute for Fiscal Studies that he must find £36 billion in new spending cuts if the Government is to meet its commitment to halve the budget deficit over the next four years.

Philip Hammond, Shadow Chief Secretary to the Treasury, said that the reported rift between chancellor and prime minister over the pre-Budget report shows that the Treasury agrees with the Conservatives on the need for a quicker reduction in the deficit.

“While Gordon Brown is attempting to create artificial dividing lines the Treasury is agreeing with us and leading commentators that what’s good for the country is a quicker reduction in the fiscal deficit,” he said.

“Once again Gordon Brown has intervened, insisted on party ahead of country.”

He said Labour were “concealing plans from the general public,” because a consensus on how to deal with the deficit had not yet been reached.

“At the heart of government there is a conflict between the Treasury, who want an early start to fiscal tightening and No.10 Downing Street – Gordon Brown – who wants to claim that that would undermine recovery.”

Following worldwide criticism to his proposal of levying a tax on all financial transactions, Gordon Brown has been forced into yet another humiliating U-turn.

The US led a backlash against the “Tobin tax” on financial transactions after Mr Brown took a Group of 20 finance ministers’ meeting by surprise with his proposal at the gathering in St Andrews, Scotland.

in private briefings Treasury and Downing Street officials had suggested that taxing financial transactions was the prime minister’s preferred mechanism aimed at curtailing international banks.

The Financial Times is now reporting officials are switching emphasis after a chorus of opposition from the US, Canada, Russia, the International Monetary Fund and the European Central Bank.

Tim Geithner, US Treasury secretary, said: “A day-by-day financial transactions tax is not something we are prepared to support.”

Dominique Strauss-Kahn, IMF head, repeated his long-held position that a Tobin tax is “a very old idea that is not really possible today”.

Signalling the change in emphasis officials said:

“We’re not that massively wedded to a transactions tax. We’re not saying ‘it’s this or nothing’ – we’re saying we need a deal,” an aide told the FT.

The aide added: “We knew going into the G20 finance ministers’ meeting that these were pretty radical steps that would put some noses out of joint,” one insider said. “The prime minister has taken a calculated risk and we’re very much up for the fight on this.”

Responding to the PMs proposal Mark Hoban, the shadow financial secretary, said: “This is embarrassing, Gordon Brown has demonstrated that he will put nothing before a cheap headline including Britain’s credibility before the world.”

The Treasuries Stephen Timms has confirmed that VAT will go back up to 17.5 percent on December 31st :

Timms said that it “will be confirmed in the pre-budget report in a few weeks time”

Earlier today HM Treasury published its departmental review, which reveals the bonuses paid to senior officials. So what are we paying senior government mandarins on top of their very nice salaries?

Sir Nicholas Macpherson, permanent secretary who has responsibility for Whitehall’s entire finances will take home an extra £10-15,000. John Kingman, who heads UKFI (responsible for controlling two of Britain’s biggest banks) can look forward to an extra £15-£20,000, and Robert Stheeman, chief exec of the Debt Management Office which has responsibility for all of Britain’s gilt issuance could also packet £10-15,000.

Five other Treasury officials picked up bonuses of between “0-£5,000″ and £15-20,000.”

For months the government, along with regulators, have been preaching that banks should no longer pay bonuses for short-term gains, instead they should concentrate fostering long-term growth and stability. So are senior employees of HM Treasury been subjected to the same rules? For some reason I don’t think so.