A blog by Luke Akehurst about politics, elections, and the Labour Party - With subtitles for the Hard of Left. Just for the record: all the views expressed here are entirely personal and do not necessarily represent the positions of any organisations I am a member of.

Wednesday, March 21, 2007

The Budget

... was even better than I expected.

I almost ... but only almost ... felt sorry for Cameron. I think he had thought he was back at his hobby of stag-hunting, stalking an aging, wounded beast. Then suddenly the stag turned, charged at him full tilt and stuck its antlers somewhere very painful.

Poor David. It just can't have been like that at Eton's debating society. Surely a chap isn't allowed to change the terms of debate just before you stand up to deliver your carefully rehearsed speech?

This was also a redistributive budget - try sticking different wage rates for a couple with kids into the BBC/KPMG budget calculator to calculate this - the PWC figures quoted by the BBC say that in 2008:
  • "Anyone earning between about £17,000 and £40,000 a year will be better off
  • Those earning less than about £17,000 will lose from the abolition of the 10p tax rate but they should more than claw it back from working tax credit
  • Those on £43,000 will pay £20 a year more in tax"

17 Comments:

Anonymous jdc said...

The BBC tax calculator is pointless, it calculates your tax for 2007-8, so doesn't take account of the changes announced yesterday, only the increases in allowances which were already in the pre-budget report...

Still, largely a good budget, though it's upset a good number of my childless 15k-earning friends (who vote) - the best thing about it was the hopeless Tory response. If I'd been Cameron in the present circumstances I'd have majored on Gordon increasing small business taxes to pay for tax cuts to big business.

9:00 am, March 22, 2007

 
Anonymous Anonymous said...

I am very disappointed in the increase on corporation tax for small businesses. Especially since it's being cut for large businesses. The restrictions on dividend payments and the outrageous claim that people are running small firms are sole employees seeking to have preferential rates of tax is insulting. We are not banking offshore. SMEs employ the majority of those working in the private sector and this budget will hit the very people that New Labour was meant to appeal to. How can you justify that?

9:12 am, March 22, 2007

 
Blogger Luke Akehurst said...

Just been at an event where Stephen Timms was speaking and said that the increase in corporation tax for small businesses was because HMT has spotted a trend towards larger businesses choosing to incorporate themselves as several small companies to avoid tax - this is designed to deter that.

9:48 am, March 22, 2007

 
Anonymous John said...

Dear Luke. Oh Dear!

http://www.manchestereveningnews.co.uk/news/s/1002/1002533_hazel_blears_hits_youtube.html

10:02 am, March 22, 2007

 
Anonymous Anonymous said...

That's a terrible reason. It's throwing the baby out with the bath water. Can you find out just how many small businesses they think are doing this? This is the same as saying we're going to cancel student loans for everyone because some rich students putting them into ISAs.

Brown has increased corporation tax rate for small businesses to 22%, yet personal tax has been reduced to 20%. How is this fair and how does it solve a problem (which I dispute) of a small number of self-employed people incorporating?

10:25 am, March 22, 2007

 
Anonymous Ian G said...

Very good budget.

Unless you are young, childless and on a low income, in which case it's pretty awful! (Or that's what it looks like anyway) A large number of young people will lose out seriously.

11:27 am, March 22, 2007

 
Anonymous Ted Harvey said...

Sorry for my typo above, there should have been a 'now' before the '34%' in the bit about share of wealth

12:49 pm, March 22, 2007

 
Blogger grimupnorth said...

You need to take lessons in economics Luke. Brown's budget is the classic clever tinkering he does so well, and there is no tax "cut" at all when you look at it,as all the papers report today. And yes it's pretty redistributive. Shame the better-off benefit at the expense of the poor though. Still, those "hard-working families" New Labour love so much can look forward to their child benefit increase........£2.55 from 2010 !!!! And single people earning less than £17,000 will be about £200 a year worse off. That should take care of their 17p an hour rise in the minimum wage.
My heart bursts with pride.

2:56 pm, March 22, 2007

 
Anonymous angus said...

"the better-off benefit at the expense of the poor"

This is quite wrong. Overall low earners benefit from the changes made-with exceptions. High earners do not benefit from the budget.

Revenue is raised from taxing gas guzzlers, reduction of tax relief on empty commercial properties and a clampdown on tax avoidance.

It is a Labour budget, even though not as redistributive from rich to poor as I would like.

5:27 pm, March 22, 2007

 
Blogger grimupnorth said...

Cuts in corporation tax will benefit Brown's friends in the business community, inheritance tax thresholds raised helps the better-off,
moillions of single low-paid workers are the "exceptions" you talk of. Well, there are quite a few of them.The child benefit rise is pathetic. And there will, effectively, be public spending cuts. A con-trick to grab good headlines. But no-one has been fooled for very long.

6:00 pm, March 22, 2007

 
Anonymous Blairite socialist said...

"Cuts in corporation tax will benefit Brown's friends in the business community"

Mild cuts will help to keep big businesses operating in the UK - as much as I find global capitalism distateful comrade you have to appreciate that this sector is vital for providing employment and wealth to the UK.

"inheritance tax thresholds raised helps the better-off"

No, it help middling types who are worried about having to pay inheritance tax because of rising house prices. It's aimed at maintaining inheritance tax at only affecting the wealthiest 6% of estates, which seems understandable to me.

"And there will, effectively, be public spending cuts"

? Where's you evidence? Growth in public spending is set to continue, albeit at slightly lower rates.


ANGUS: "It is a Labour budget, even though not as redistributive from rich to poor as I would like."

I agree, but it is definitely a budget that will help keep Labour in power.

7:49 pm, March 22, 2007

 
Anonymous angus said...

Grimupnorth,

According to the IFS who tend to be expert in these things, the cut in the corporation tax rate is funded by reducing the corporate tax allowance and higher tax on SMEs. They also say most losers from the simplification of the tax system are in the middle of the income distribution but lose only small amounts. There is also the rise in the ceiling on NI contributions, which the left should welcome.

The overall impact of the budget is only mildly progressive, but it isn't regressive as you claim. Your point about the severe constraints that a neutral (as opposed to tax raising) budget will place on public spending growth is right and the more important point though.

8:08 pm, March 22, 2007

 
Blogger el Tom said...

I think once inflation eases up we should be looking at extending tax credits and adding a further top bracket to individuals and capital gains, while further cutting corporation tax (those profits aren't worth making unless people get to take them home. So let the taking home be redistributed, not the profits themselves).

What do we reckon?

1:00 am, March 23, 2007

 
Anonymous Anonymous said...

I am neither lucky enough to have a family anymore nor lucky enough to earn more than 17,000 quid. The calculators tell me that, following the Budget, Brown will take 200 quid a year from me and give it to his rich friends. Tell me Mr Akehurst, how do you think I should economise? I think I'll start by saving 36 quid a year on membership fees to a party that ignores the plight of the poor and benefits the rich. Do you agree?

6:30 am, March 23, 2007

 
Anonymous susan calder valley said...

I agree entirely, anonymous. Luie seems to have gone rather quiet.

7:52 am, March 23, 2007

 
Anonymous Anonymous said...

Absolutely. Supporting families is great but we should not be penalising young single people on low incomes.

Do you have an answer Luke?

12:08 pm, March 23, 2007

 
Anonymous angus said...

"I think once inflation eases up we should be looking at extending tax credits and adding a further top bracket to individuals and capital gains, while further cutting corporation tax (those profits aren't worth making unless people get to take them home. So let the taking home be redistributed, not the profits themselves)."

I think, Tom, the best solution is to raise the threshold for paying the basic rate so taking all the lowest earners out of tax.

I think your very Croslandite point about focusing on taxing distributed rather than undistributed profits is essentially right.

5:30 pm, March 23, 2007

 

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