Wednesday, March 21, 2007

Brown stuffs 2p tax cut up Clarke's backside

Without desisting from anything I wrote earlier - the Blairites and Fleet Street would still find a reason for forcing a contest even if Gordon Brown was revealed as the second Son of God - today's Budget was a stormer. For years, governments of right and left have dreamed of a 20p standard rate of income tax. It is Gordon Brown who has finally delivered that and for that and many other reasons he will go down as the greatest Chancellor since Gladstone, whatever happens next in his career.

It was absolutely typical of Gordon that after presenting eleven Budgets himself he went and stole the next Chancellor's first Budget as well by announcing the 2p standard rate cut. His successor probably won't thank him for that but I can't help but admire his chutzpah.

Charles Clarke and Alan Milburn had been calling on Brown to say more about what he would do as Prime Minister, and today Gordon gave them the perfect answer. He not only said what he would do, he actually did it, by pre-announcing a decision that didn't actually need to be announced for another year.

Indeed, he has gone even further than that and announced another major tax cut to take effect in April 2009 - just before the likely date of the next general election - rsising the threshold for the 40p top rate of tax to £43,000 and so free millions of middle-income earners from the pernicious effects of "fiscal drag."

David Cameron tried to make the best of it by claiming Brown had adopted his agenda of "sharing the proceeds of growth," but Cameron knows that he too has been stuffed, and that any room for manoeuvre for further crowd-pleasing tax cuts has been absolutely closed-off.

I wrote earlier today that although Brown's enemies will deny him a coronation, the crown remains his to lose and a good Budget performance would make it all the more certain he would win a serious contest. On that score, the Chancellor certainly delivered.

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17 comments:

Anonymous said...

Hang on, drop to 20p but then take away the 10p level. In essence, most people will be worse off once the NI is taken into account.

All in all a piss poor budget done for effect and show as leader rather than tackling the problems within the country.

MorrisOx said...

Very dangerous to make judgements on the hoof, Paul, especially as my immediate straw poll suggests ordinary people haven't bought the 'tax cut' top line.

Go back and examine the fine detail.

Andy W said...

By dropping the 10p tax rate - or really doubling it to 20p he is hitting the worst off.
Tax credits are hopelessly complex and have left may people in dire straights due to peoples incomes rising - and many do not claim them at all.
This is not a true labour budget looking after the poorer members of society.
Please look at the big picture - not his eye-grabbibg headline.
He is every bit as pathetic as Blair.

Paul Linford said...

MorrisOx

I am well aware of the old maxim about a Budget that looks good on the day looks less good 24 hours/a week/10 years later etc but a blogger has two choices in this situation. S/he can ignore it, or give a fairly instantaneous (or on the hoof) judgement. I have chosen to do the latter. I expect you will see a more considered judgement in my weekend column.

On the tax cut point, the 10p starting rate had outlived its usefulness anyway and Brown has compensated by targeting specific measures (eg child benefit) towards those who need them. Okay, so the 2p standard rate cut is being partly paid for by abolishing the 10p starting rate, but that doesn't alter the fact that the 20p standard rate is an historic achievement, or that in the long run the system will be far simpler.

MorrisOx said...

I think that most people will believe it when they see it to the extent that they think that when they do see it they will also have seen several other things by then.

Brown (his successor, actually) has a fiscal mountain climb and by this time next year the full impact of the latest interest rate rises will have begun to kick in to the economy.

I don't think people buy political cheap shots anymore and that is what the tax cut amounted to.

Honey Weeks said...

Paul,

A comment on your website...You provide an excellent forum for the discussion of many issues, however, you compromise your status through your use of colloquial language: "stuffing something up someones backside" may raise a chortle in the pub, but isn't really appropriate for a website with as much stature as your blog...it is possible to express oneself with wit without recourse to coarseness. I only make this comment because I am a fellow Christian and want to see your website treated with seriousness rather than with indifference, remember what we are told to do when communication with non-Christians and the outside world in the New Testament: "...to speak with salted word."

Honey.

David Gladwin said...

Brown has been a lucky Chancellor, but even by his standards, this Budget demonstrates his fickleness more than his much-vaunted prrrudence.

He will make a terrible leader.

Paul Linford said...

Honey

I knew I should have made the headline "Brown shoves tax cut up Clarke's fat arse."

Richard Bailey said...

If I can adapt the much loved phrase "marry in haste, repent at leisure" to this Budget, I would say "cut in haste, pay at leisure".

This Budget and indeed the political activity of the last few days, provides all the evidence you need that Cameron is now running the country.

Cameron leads on environment, Gordon turns green. Cameron leads a Doctors rally, Gordon (& Tony) hold tortuous press conference on public services. Cameron looks for tax cuts, Gordon delivers - but just to out flank Cameron.

Gordon's mistake is that everything he is currently doing is designed to destroy Cameron. He can't help himself. He is the ultimate class warrior.

The trouble is that twisting and turning to outwit Cameron is a world apart from leading the country and his obsession will be seen for what it is.

I admire your loyalty, Paul, but even you must smart at some of the things he has and will do to win the votes of posh middle England. He is betraying his principals, the poorest in society and his supporters, but Gordon's "destiny" is more important than good or principalled leadership.

Admirable Chancellor - disastrous Prime Minsiter in waiting.

Richard Bailey said...

Gerald Kampfner (on Newsnight) agrees with me!!

Paul Linford said...

About Flintoff, or Brown?

david kendrick said...

This fiscally neutral budget has more political than economic significance.

Was it good politics? Pretending the budget was one thing ('tax-cutting') when it wasn't, is typical nulab spin. GB certainly changed his style. If this is representative of how he is going to behave as PM, those who forecast that he will be 'TB-lite' or 'TB without-the-charm' maybe have a point.

Richard Bailey said...

It going to be a while before I live that one down, isn't it??!!

Kieran said...

Paul, I would agree with you on the "in the long run the system will be far simpler", except...

According to the budget notes I read last night at http://www.hmrc.gov.uk/budget2007/master-notes.pdf,
linked from http://www.hmrc.gov.uk/budget2007/index.htm and now a broken link, the 10% band will remain for investment income. So, it's a tax cut for those earning more than £16,000, a tax hike for those poorer paid, and (to avoid nasty pensioners getting cross) it only penalises the working poor.

RedEye said...

Childless under-25s cannot claim tax credits or child benefit, so the abolition of the 10p tax credit will hit them (including many students doing part-time work) hard.

I agree entirely with Andy W - the forms are a nightmare, and many people have been left in penury after being overpaid tax credits, being ignored by the Inland Revenue when they tell them they're being overpaid, only for the IR to then demand the money back in one fell swoop. The experience (and the horror stories) put many people off claiming tax credits altogether.

Plus there's the punitive means-testing associated with tax credits. The Budget has just made this worse by increasing the clawback rate from 37p to 39p. In some instances, people on tax credits (when the 39p is added to 20p income tax and 11p national insurance) are losing 70p out of every extra £1). Even before the 2p increase in the clawback rate, I knew a low-paid factory worker on tax credits who was put off from doing overtime through fear of ending up worse off. It's absolutely disgraceful, particularly from a Labour government.

If Brown had really wanted to simplify the tax system, he should have scrapped the 10p tax band and used the proceeds to increase the personal allowance, lifting many low-paid people out of income tax altogether (which is the way it should be, when it eases the poverty trap).

Yet the Tories who call for taking the low paid out of income tax (such as John Bercow and Lord Saatchi) are pretty marginalised, and we hear instead George Osborne call for abolishing stamp duty on shares. Which just goes to show that, so far, Cameron's compassionate conservatism is just a centrist lid on a toilet of reaction.

Apart from missing an opportunity to make good on their talk of becoming a party of social justice, the Tories are missing the opportunity to gain the votes of disillusioned working-class Labour voters (or those who haven't voted for anyone) in marginal seats. As Frank Field has noted, 'What makes people think that the working-classes like paying tax?'

By contrast, the people indignant at paying stamp duty on shares probably vote Tory already.

The Fat Controller said...

Nor will Middle England be impressed, when the much vaunted 2p cut in the basic rate will be offset by the first slice of their income being subject to the abolition of the 10p rate of tax, the tax rate for small firms is going up (while the rate for big business is cut - not very Labour is it?), and those earning between £35,000 and £38,000 will be hit by an 8p increase in NI contributions.

Instead of there being something for everyone, there will be something to annoy everyone, and Brown will fall between two stools.

And this is why a lot of people (core Labour voters) are utterly fed up with this government - they listen to all the finger-wagging lectures and 'get tough' initiatives from ministers, asking rhetorically why people here won't do the jobs that immigrants are ready to do, while indulging in policies (whether it's the freeze on the personal allowance for so many years which dragged more low-paid people into income tax, the abolition of the 10p rate, or the ridiculously punitive tapering-off rates for tax credits) which hammer people who take (or are tempted to take) low paid jobs to get off benefits.

And the young unemployed are, meanwhile, treated as if they're all workshy morons by being subjected to the patronising nonsense of New Deal jobsearch programmes, in which they spend three hours having their intelligence insulted by doing exercises such as coming up with half a dozen good points of having a job, and then are given yellowing copies of the local paper to look for jobs. All this has been funded by the abolition of the Jobclubs, which treated people with a bit more respect, gave them free postage and stationery for job applications, and had a wide range of newspapers (not just yellowing and out of date copies of just the one local newspaper).

It's not only wrong, and unjust, in itself, it also overshadows all the government's genuinely good policies such as SureStart, the right to leave in a family emergency, the right to four weeks' paid holiday, and the minimum wage.

And it makes more likely (through abstensions and votes for the LDs) the election of a Conservative government which would abolish SureStart (offering as spurious justification claims that SureStart has 'crowded out' the voluntary sector, when SureStart has, in fact, plugged gaps which were not being filled by the thriving voluntary sector to which Cameron so frequently alludes) and (through leaving the Social Chapter) abolish the right to four weeks' paid holiday, and which voted against the government's plans to give parents of disabled children the right to flexitime.

Instead of workers having statutory rights, there will, instead, be Cameron's politics of exhortation. Just how much worth that will be to workers' who want such things as four weeks paid holiday is shown by Cameron's much vaunted call for Smiths to stop its chocolate offers. Smiths scrapped it initially. Then, once the fuss caused by Cameron's intervention had died down, they started up the chocolate offers again.

Honey Weeks said...

Wow, you have surprised me, Mr. Linford, I thought that journalists were supposed to a) be skilled in the use of the English language, b)capable of analysis. The budget doesn't actually do much for anyone at all, what is given to Peter has been taken from Peter (and not Paul) somewhere else. For a two-pensioner household, after the abolition of the £200 Council Tax subsidy there net gain is roughly zero. I think Clarke should be delighted with this budget, the only people is benefits is the bureaucrats who have to implement it, and aspiring Sun headline writers like your good self. I shall pray for you.

Honey.