Wednesday, March 16, 2005
Black gold spares Brown's blushes
Posted by David Smith at 04:03 PM
Category: Thoughts and responses

An initial budget response.

Chancellors, particularly this one, are good at pulling rabbits out of the hat, particularly in pre-election Budgets. But that assumes that the Treasury has provided a hat in the first place.

It is testimony to how close Gordon Brown has come to breaking his own golden rule that in this pre-election Budget there is a fiscal tightening - a net tax increase - of £265 million. Talk of a £5 billion giveaway, which was doing the rounds in Westminster even a few days ago, was badly misplaced.

True, some of this was achieved by smoke and mirrors. The biggest single tax announcement in the budget was the £1.1 billion Brown expects from realigning North Sea corporation tax payments. This, the Treasury insists, is not a permanent tax increase but a timing change that will ultimately be unwound. But it is mighty convenient and, taken together with more than £600 million from "protecting tax revenues" – anti-avoidance – and £340 million from abolishing poor areas' relief on commercial stamp duty, the sums just about add up.

Thus, Mr Brown was able to raise the stamp duty threshold from £60,000 to £120,000, stealing some of the Liberal Democrats’ clothes (and helping safeguard against a house price crash in the process).

The hand of Downing Street, and even the influence of Alan Milburn, can be detected in that one.

And the Chancellor was able to give pensioner households £800 million to cut their council tax bills by £200 each. This, a straight election bribe, was also a direct response to Michael Howard’s successful coup, when he unveiled his policy to halve pensioners’ council tax bills last month. When elections are approaching, it is always dangerous for oppositions to show their hand.

Has the Treasury solved the conundrum over the black hole? No, there is still a question over whether it will be met in the present economic cycle, and that will continue beyond the election. If this chancellor stays in the job, it will be hard for him to raise taxes, however.

What about the success of the UK economy, 50 quarters of economic growth and now in its longest run since 1701? Sooner or later Brown will be able to get the statistics going back 1,000 years.

There is, it should be said, no immediate cloud on the growth horizon. In the meantime, business will digest the de-regulation measures announced in the budget. They sounded pretty good, including the adoption of a Dutch style "one in, one out" approach to red tape.

The devil, as always, will be in the detail.

From Times Online, March 16 2005


It seems to me the most significant tax proposal this week was the one from Germany’s Schroeder to cut corporation tax from 25% to 19%. It makes the UK’s 30% look a bit sick.

What has Gordon done for business? He’s reducing the number of government bodies that UK business has to deal with. Does anyone seriously think UK business will see a lower workload from government bureaucracy as a result of their changing the headed notepaper?

It would mean something if Gordon was going to sack a corresponding number of bureaucrats but this parasite layer will just keep on inventing ways to feed itself – off UK business.

Posted by: David Sandiford at March 19, 2005 05:12 AM
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