This was ‘manifesto Budget’ for a man set to become prime minister without a
general election, yet determined to set himself up as a attractive option for No
10 all the same.
He gave away £8bn by cutting income tax from 22p to 20p in the pound, and
£1.3bn by taking a cleaver to corporation tax with a cut from 30p to 28p.
Oh, how Labour MPs roared when they received the news in the House of
Commons. And how fresh Gordon appeared. Not grey and fatigued as in previous
Budget speeches. He even smiled or smirked, depending on your interpretation;
despite David Cameron’s claim that he dare not risk it.
But don’t forget the chancellor has pledged himself to revenue-neutral
Budgets which means – and here’s the shocker – he recoups his giveaways
elsewhere. As one immediate press release put it, it’s a ‘smoke and mirrors’
The Red Book reveals all – or at least most. For instance, by removing the
starting rate of income tax on non-savings income, Brown raises £7.3bn. That
pays for the income tax cut, then. But there’s a further £1.4bn raised from
reducing capital allowances on general plant to 20%. Well, that deals with the
loss on corporation tax.
Perhaps more startling – and the move that will have most people wishing he’d
left well enough alone – is the £1.1bn the chancellor will raise from
adjustments to National Insurance arrangements.
Small business will be stung. Some £820m, almost a billion, will be lost by
them between now and 2008/9 via an increase in the tax on small business to 22%.
And if you were enjoying relief on empty property relief, well you might be
better off finding some tenants. The reduction in the period the relief is
available for, means the Treasury benefits to the tune of almost £1bn next year.
Well, Gordon had to have some way of raising the threshold for working tax
credits, increasing age allowances and increasing child tax credits.
The upshot is that on a non-indexed calculation the Treasury is down by
£130m. Not bad on a total tax take of around £550bn. The question will remain,
though, whether the Treasury has got all its sums right. If past Budgets are
anything to go, they’ll be some figures out of place somewhere.
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