A simple conclusion from a ‘simplification’ budget


A simple conclusion from a ‘simplification’ budget

THE DAILY Mirror declared triumphantly: “Historic 2p income tax cut that will make Gordon PM”. However, even chancellor Gordon Brown himself said that his latest budget was not a tax-cutting budget, but was rather a restructuring of the tax system.

Over his ten years as chancellor of the exchequer, far from cutting taxes for most households, Brown has nearly doubled them, to an average of £16,000 a year of personal taxes per household. He collected £215 billion from personal taxation in 1996-97, but £399 billion in 2006-07. This was mainly done without increasing the main tax rates, but through ‘stealth’ taxes.

The result of last week’s ‘tax-cutting’ budget even, is actually a further increase in taxation overall. Most taxpayers will end up in the same financial position and some will gain. But one in five will lose, and they are mainly low-income workers without children, who face a net loss of up to £233 a year due to the abolition of the ten pence in a pound income tax band.

This measure even shocked a Financial Times journalist, Robert Budden, who wrote: “The amazing thing to me is how badly low-paid and part-time workers are being treated. For many of these people, the 10p starting rate of income tax has become their lifeblood.”

Low paid families should not be so affected, as they are to be compensated through Tax Credits, though for some the credits are tortuous to apply for.

Big business was delighted with a corporation tax cut from 30p to 28p (down from 33p when New Labour was elected in 1997). Brown tilted the main benefit of the corporation tax cut towards the multinational finance, pharmaceutical and service companies at the expense of small businesses, as he increased the small business corporation tax rate. He also reduced some capital allowances, which will not help manufacturing industry.

Gravy train

THE FIELD day for the super-rich did not stop at the corporation tax cut. They also celebrated having no significant attacks made on their legal tax evasions, such as on private equity chiefs making use of the capital gains tax system to cut their tax rate on profits to just ten per cent.

As the GMB union protested: “the Chancellor has missed an opportunity to end the gravy train for the multi millionaire elite who are given tax breaks on the proceeds of their asset stripping activities in the private equity industry. The taper tax relief loophole alone costs the exchequer £4.5 billion a year. Closing this loophole could pay for equal pay for women in the public sector.”

Particularly galling for working-class people is Brown’s boast about presiding over the longest period of sustained growth in British history. Despite this growth, ordinary people have suffered low pay rises and high energy prices, taxes, interest rates, house prices and council tax. Living standards for workers are mainly stagnant; average household income, after adjusting for inflation, has risen by only 0.35% a year in the four years since 2001-02.

On top of this, Brown has announced that public spending increases are to be as tightly squeezed as they were in New Labour’s first two years in office, when he continued the spending slow-down of the Tories. This lies behind his demand that public-sector workers should only have a 2% pay rise and behind continued cuts in vital services like health and education.

Brown argued that the rationale for his tax changes was simplification. However, with New Labour trailing the Tories by ten percentage points in the opinion polls, the headline income and corporation tax cuts were partly, maybe largely, motivated by pulling the rug from under the Tories, who were traditionally the low tax party.

Brown himself is increasingly unpopular. Last week’s Guardian-ICM poll suggested that the Tories would have a 15-point lead with Brown as Labour leader and other polls show a similar result. This has given New Labour’s top Blairites the pretext to discuss reluctant David Miliband as a possible alternative leader to Brown.

But whether Brownites or Blairites, they will all produce similar future budgets, trying to put the multinationals first, as will the other two main capitalist parties. Ordinary people urgently need to build a new workers’ party that will do the exact opposite and put the interests of the overwhelming majority of people first.

The socialist will argue that the new workers’ party, when it exists, should adopt a socialist programme. That is the only route to permanently ending the unacceptable poverty levels and obscene inequalities of today, and building a decent life for all.