In the week since the Budget, there has been plenty of time to look at the small print. As in all Gordon Brown’s budgets, his speech only tells half the story. The good news was largely leaked in advance. The bad news was not even contained in the speech at all. As ever, it is not until you are able to look at the detail that the full picture emerges.
Gordon Brown’s announcement of a 2p cut in income tax was intended to wrong foot David Cameron who had to get up within seconds to reply. However, it was a con trick which was exposed as soon as the figures were published. It was only later that it emerged that instead of cutting taxes, the Chancellor had put them up. While the basic rate may be coming down, the 10p starting rate for earned income will be scrapped and the upper limit for National Insurance Contributions will be raised As a result, the tax burden is set to rise to its highest ever level of 40.4 per cent, a rise of over £17 billion. Everyone earning between £5,000 and £18,000 will end up paying more tax and many more will become dependent on tax credits. Yet as the many people who come to see me to complain about tax credit mistakes can testify, half of all tax credit payments are wrong.
There was little good news for business in the Budget either. Again, much was made of the headline 2p cut in Corporation Tax. However, the overall burden of business taxation will rise by £1 billion next year. Smaller companies will be particularly hard with a rise in their rate of corporation tax by 3 per cent and changes to allowances which will further damage smaller firms that can afford to invest less. It is hardly surprising that the British Chambers of Commerce said that its members feel dismayed by the measures taken which will hit their competitiveness and increase their tax burden.
Despite the tax rises, there was little good news for public services. The growth in education spending was halved, breaking Labour’s manifesto pledge to increase the share of national income spent on education. In addition, there was just one mention of the NHS in the entire speech and that was to reannounce what he first said three years ago, the increase in NHS spending this year. Locally, our NHS is struggling with record deficits. The Mid Essex PCT is forecasting a deficit of £20 million this year and Mid Essex Hospitals is in the red to the same amount. Almost 20,000 jobs are set to be lost from the NHS this year and redundancies at our own local hospitals are already being declared. The Budget had nothing to offer, only higher taxes and poorer services.
