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Tories Slam Brown's Last Budget

by Jason Gorringe, Tax-News.com, London

23 March 2007


Following the delivery on Wednesday of what seems certain to be his last budget, the opposition Conservative party has - somewhat unsurprisingly - slammed the measures unveiled by Chancellor Gordon Brown, dubbing them "a tax con not a tax cut".

Brown surprised many by announcing a 2% reduction in the rate of corporation tax and a 2% cut in the basic rate of income tax, representing the first major cut in these taxes in many years.

But in a somewhat confusing message for the small business community, he also decided to increase the rate of corporate tax for small companies with profits up to GBP300,000 per year by 3% to 22% over the next two years in a bid to ensure "fairness across the tax system."

Brown's decision to cut the basic rate of personal income tax by 2% to 20% was also unforeseen by most observers, and his announcement that personal allowances would be increased and tax brackets nudged upwards over the next two years has been generally welcomed.

However, as with the corporate tax cut, the revenue blow to the Treasury will be softened by offsetting measures, such as the elimination of the 10% tax band in 2008, and the alignment of National Insurance bands and higher rate tax bands, thus meaning that higher earners are more exposed to higher rates of national insurance contributions on more of their income.

The Conservatives have seized on the changes, describing the income tax move as Mr Brown's "stealthiest tax yet", and arguing that taxes on business are likely to rise by GBP1 billion in 2008-2009, plus a further GBP1.8 billion increase in the following financial year.

Speaking with regard to the standard rate income tax reduction, Tory leader David Cameron announced that: "You have finally given us a tax cut. You normally do that before a general election, but you are in such a deep hole you have had to do it before the leadership election."

In an interview with BBC Breakfast following the budget, Mr Brown dismissed the opposition 'tax con' allegations as “absolute nonsense”, suggesting that:

“I’ve tried my best by everyone. On average, it’s GBP100 per household better off, for families with children about GBP250 per household. And what I’ve tried to do is look at the needs of particular groups as we make this major change in the tax system."

He continued:

"It’s a major reform in a fiscally neutral Budget, the right thing for the economy at this time. I felt it right that we dealt with some of the anomalies in the tax system and dealt with them now.”


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