Link to this page: https://www.socialistparty.org.uk/issue/295/13972
Low growth and high deficits end Chancellor's surplus
JUST AFTER we go to press, on 9 April, chancellor Gordon Brown presents his budget. The financial media's 'experts' think it will be a 'dull' budget - but then it's not the experts who'll be paying the cost.
National Insurance (NI) rose by 1p in the £ on 6 April. This hidden tax rise hits hardest at low-wage and middle-income earners. It's supposedly to pay for small and very belated public service increases such as rises in NHS spending.
What's more, many NHS workers, threatened with back-door privatisation and foundation hospitals which could mean big profits for private entrepreneurs remain unconvinced that much has improved.
That scepticism is mirrored within the general population - in a MORI poll last weekend, 36% said they thought the health service would continue to deteriorate over the next few years compared to 29% who think things are getting better in the NHS. Last year, most of the public believed that the service would improve.
This is unlikely to get better as Brown's lucky days of easy financial surpluses are over. He had already cut estimates of economic growth. In last November's mini-budget, he cut the anticipated rate of growth to 2.5%-3% for 2003 and 3-3.5% for 2004. Less than six months later Brown will probably cut these forecasts by another 0.5%.
Lower production means less tax revenue. In 2001 Brown gave back over £11 billion to rich business executives in one year through corporation tax cuts alone. Then last November Brown predicted that £3.4 billion less income tax and £3.7 billion less corporation tax would come in than he'd hoped. This is going to get worse next year.
Even worse, as economic growth falters, the budget deficit rises. Brown will now have to increase government borrowing. Last year the chancellor thought the deficit would total £13 billion. Last November he predicted a rise to £20.1 billion in 2002/3, £24 billion next year and £19 billion the year after.
Now Brown is likely to be borrowing nearly £30 billion with a predicted deficit of £28 billion in 2003/04 and rising still further to £31 billion the year after.
Brown still puts his trust in capitalism to deliver new booms. He's also assuming that the big companies are going to be paying their taxes. The capitalist class themselves aren't so sure about the boom and even less certain that they'll be paying their tax.
As the article below shows, Brown is facing a weakened world economy and low growth. How long will it be before capitalism demands bigger spending cuts and/or huge tax rises?
In The Socialist 12 April 2003: