BBC NEWS
BBCi CATEGORIES   TV   RADIO   COMMUNICATE   WHERE I LIVE   INDEX    SEARCH 

BBC News UK Edition
 You are in: Events: Budget 99: NEWS  
News Front Page
World
UK
England
N Ireland
Scotland
Wales
UK Politics
Business
Entertainment
Science/Nature
Technology
Health
Education
-------------
Talking Point
-------------
Country Profiles
In Depth
-------------
Programmes
-------------
BBC Sport
BBC Weather
CBBC News
SERVICES
-------------
EDITIONS
NEWS Wednesday, 10 March, 1999, 20:30 GMT
Politics v prudence
chris giles
The BBC's Chris Giles looks at the Budget that put Gordon Brown back in the role of political fighter rather than simply a prudent chancellor.

Except for a bit of political theatre, quite what is the point of cutting the basic rate to 22% is a hard question to answer.

Gordon Brown said his first principle was that the interests of children was paramount. Cuts in the basic rate do nothing more for families with children than any other tax payer. And the cost of the basic rate cut adds up to four fifths of the total tax cuts.

Add to this the 10p tax rate, which does very little either for the lowest paid because what they gain in lower income tax, they lose in lower benefits, it's hard to see where Gordon Brown wants to take the tax system.

There were many other big tax cuts in the Budget. The new 10p lower rate of tax and the abolition of the existing 20% rate cost 1.8bn or about 35 per person. The new children's tax credit will cost 1.4 billion from 2001. And the increased support for pensioners will add up to a billion.

Where does the money come from?

Partly from the public finances being in better shape than Gordon Brown thought in November. He expects social security payments and interest payments on government debt to be lower than expected. He forecasts economic growth also to be stronger than most independent forecasts and that keeps tax revenues coming in.

If his forecasts are correct, and there is little reason to think they are wildly out, then the economy will support the government in the run up to the next election.

But the main way Gordon Brown has been able to cut tax in some areas is to raise tax in others. There were 25 tax raising measures in the Budget. The abolition of the married couples' allowance, mortgage interest relief, increases in petrol duties, increases in tobacco duties and the new climate change levy on polluting firms are the most significant increases.

If you earn above 30,000 you are unlikely to gain much from the Budget. If you are married without children with a mortgage you will lose. If you drive or smoke a lot, expect them to get much more expensive.

But if you have children, are not paid too much, are a low income pensioner on Income Support, are single, do not have a mortgage, do not drive or smoke, Gordon Brown is your kind of Chancellor.

The big question

But was the Budget the "big giveaway" that many have billed it as? This many seem irrelevant, but it is crucially important because it could damage the prospects for further interest rate cuts.

Gordon Brown said categorically that this was not the case because his forecasts for borrowing were lower than in November.

This misses the point as he has, after all, reduced taxes by 1bn in the coming financial year and more in subsequent years. It is irrelevant if borrowing is lower than expected because spending is down due to falling unemployment.

So when the Monetary Policy Committee looks at the figures next month, it will be less likely to reduce interest rates than if Mr Brown had not had a Budget on 9 March.

Links to more NEWS stories are at the foot of the page.


E-mail this story to a friend

Links to more NEWS stories

© BBC ^^ Back to top

News Front Page | World | UK | England | N Ireland | Scotland | Wales |
UK Politics | Business | Entertainment | Science/Nature | Technology |
Health | Education | Talking Point | Country Profiles | In Depth |
Programmes