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Last Updated: Wednesday, 10 December, 2003, 22:49 GMT
Taxing times for the chancellor
By James Landale
BBC political correspondent

The ghost at Gordon Brown's pre-Budget feast was a little word called tax.

There was, of course, lots of talk of tax relief for child care and tax relief for sports clubs and so forth.

But of tax rises there was nothing, an echoing silence around the Commons chamber - yet it is an issue that some day soon he will have to address.

The problem for the chancellor is that he is not getting enough cash into his coffers.

Big borrower?

Even though the economy is growing healthily, tax revenues are down.

Gordon Brown
Mr Brown delivered his pre-Budget report on Wednesday
So to maintain government spending on health and education and so on, Mr Brown said he will have to borrow 37bn this year, 31bn next year, and 30bn the year after that.

This is all a lot more than he had expected to have to borrow.

There is nothing inherently wrong with all this borrowing.

Mr Brown's problem, however, is that he's in danger of breaking his so-called golden rule.

Golden rule?

This says that he can borrow only to invest in long term spending - he must not borrow to pay for day-to-day spending, say on nurses salaries and the like.

Mr Brown insists that he is meeting his golden rule by a margin of 0.2%, about 14 billion.

He believes that tax revenues will pick up as the economy continues to grow. This, he hopes, will be enough to see him through to the next election.

But some - such as the Tories and many independent economists - disagree.

They believe that the only way Mr Brown can meet his golden rule is by cutting spending - which is unlikely - or by raising taxes - which they see as inevitable.

Stealthy taxes?

Labour has raised a lot of taxes since 1997 but the mood at Westminster now is that, for the moment at least, a high water mark has been reached.

Many of the tax increases were introduced stealthily so we did not notice them - taxes on businesses, taxes on pensions, indirect taxes.

Houses of Parliament
Has the mood changed at Westminster over tax?
Other tax hikes - such as this year's 1% of National Insurance - were more transparent.

Mr Brown argued that this was necessary to pay for improvements to the health service; the low key response suggested that voters seemed to accept his argument, however grudgingly.

But opinion polls are beginning to suggest that voters are losing patience with tax increases.

Council tax hike

A YouGov poll for the Daily Telegraph this week suggested that 69% of people felt they paid too much tax and 79% thought a considerable amount of that tax was wasted.

Large council tax rises averaging 13% this year have dismayed voters, many of whom blame the government and not their local town halls.

Gordon Brown likes to joke that the only thing that keeps him awake at night is baby son John
There is obviously a 'they-would-say-that-wouldn't they?' factor in all these polls - no one likes paying taxes. But many voters are unhappy.

Above all, many feel that while they are paying substantially more in taxes, they have yet to see any corresponding improvement in their public services.

In this climate, voters who might previously have accepted higher taxes for health are unlikely to be keen to pay more to save Gordon Brown from breaking some golden rule they have never heard of.

Peril?

It is, above all, extremely unlikely that Mr Brown will want to raise more taxes so close to a general election expected in the summer of 2005.

This is a political reality that the chancellor will ignore at his peril.

The Tories, however, insist the government will simply be deferring pain, that eventually tax payers will have to foot the bill for the borrowing.

Gordon Brown likes to joke that the only thing that keeps him awake at night is his baby son, John.

His critics believe that one day soon the chancellor's repose might also be interrupted by a not so little thing called tax.




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