The UK Budget, 21 March - Smoke And Mirrors
The Chancellor Gordon Brown has today delivered what many expect to be his final Budget speech, before taking up the role of Prime Minister. Mr Brown did not disappoint the masses with a flawless performance, which highlighted many positive factors in the budget, while glossing over some of the not so helpful changes. One phrase to best describe today’s changes - “Smoke and Mirrorsâ€.
The highlights include :-
· A fall in the basic rate of tax form 22% to 20%.
· Lower tax band of 10% to be abolished, meaning all income tax will start at 20%.
· The start of the top rate income tax band is increased to £43,000.
· Upper threshold for payment of national insurance increased to £43,000.
· Beer up by 1p a pint (from Midnight Sunday).
· Wine up by 5p a bottle.
· Cigarettes up by 11p a packet.
· Fuel duty up 2p a litre from October - in line with inflation.
· Largest “gas guzzling†cars see an increase in road tax to £300 this year and £400 in 2008.
· Child benefit, for first child, increased form £17.45 a week to £20 a week by 2010.
· Education spending set to increase.
· NHS investment to increase by £8 billion this year.
· Inheritance Tax threshold to increase to £350,000 by 2010.
· Staggered rise in pensioners tax free allowances with under 75s to be increased from £7,280 to £9,770 in 2011, with a similar rise for 75s and over.
· Assistance from a central fund with regards to bankrupt pension schemes.
· Corporation tax to be cut from 30% to 28% from April 2008.
· Tax rate on smaller companies to be increased from 20% to 22% by 2009.
Mr Brown also gave a summary of the economy over the last 10 years, showing a sustained period of growth under his tenureship.
While there is no doubting that the economic figures look good on paper, they are no where near as impressive on further investigation. The fact is that we have seen hundreds of new taxes and tax rises over the last 10 years, together with privatisations of state controlled companies, which have filled the coffers of the treasury. This has allowed the government to increase spending on public services, at the expense of many UK tax payers who have seen their “real†income fall, and their tax burden increase dramatically.
When Mr Brown delivered his shock decrease in the basic rate of tax from 22% to 20% there were cries of joy from the Labour MPs, many of whom had missed his earlier short sentence which abolished the 10% income tax band - at the expense of ALL tax payers.
While there will no doubt be big headlines tomorrow about the fall, the two changes together are tax neutral - “Robbing Peter To Pay Paulâ€.
There are also various other “Smoke and Mirrors†which give the impression that the Chancellor has delivered a “give away†budget when in fact it is tax neutral. The next 12 months should be very interesting as we see major changes in the leading political parties.
Who will win the next general election?
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