Saturday, March 24, 2007

Brown's Last Budget

Gordon Brown’s last budget moves a lot of furniture around to little effect. It is clearly a political budget designed to wrong-foot the Conservatives and ensure the succession. It seems to have been successful from that point of view. There is a lot of talk of Brown having “shot Cameron’s fox” by cutting the basic rate of income tax by 2p. Other fairly Conservative measures include raising the 40% top-rate of income tax from £38,000 to £43,000. However, he has also raised the ceiling on National Insurance contributions – but not by much - from £33,540 to £43,000 (aligning the ceiling with the top-rate of income tax). He has cut corporation tax (from 30p to 28p) and raised the threshold for inheritance tax to £350,000.
The 2p cut is offset by the abolition of the 10p tax band. This, on the face of it, is a regressive measure, which, although it affects all tax-payers, hits the low-paid hardest (the rate of tax on most of their taxable income is effectively doubled). But Brown is claiming low-earners will not be adversely affected because this will be off-set by increases to working tax credit and child credit (if you a low-paid and childless tough shit), although as I understand it the details of these increases are not yet available. (Politaholic is not an economist and this is probably a silly question: but what is the point of taxing low earners then giving it back to them in tax credits? Why not tax them less in the first place? Would that not also save on the administrative costs?). The Taxpayers Alliance is quoted in the Guardian as commenting: “Brown has basically delivered George Osborne’s first budget”. That seems to be the size of it.


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