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Last Updated: Wednesday, 21 March 2007, 20:03 GMT
Brown cuts basic tax rate by 2p
Gordon Brown

Chancellor Gordon Brown announced a cut in the basic income tax rate from April 2008 in a surprise move at the end of what is likely to be his last Budget.

But his decision to scrap the lower 10p tax rate and raise National Insurance thresholds means few will be better off - and prompted claims of a "con trick".

Duty on beer and cider rises 1p a pint, wine 5p and a packet of cigarettes 11p.

Road tax on "gas guzzlers" rises to 300 this year, and to 400 next year. Corporation tax falls from 30p to 28p.

This year's 2p fuel duty rise will be delayed for six months.

2p off basic rate of income tax
10p starter rate abolished
2p cut in corporation tax
Gas guzzling car duty up to 300 this year and 400 next
Beer and cider up 1p, wine 5p, spirits duty frozen
11p on cigarettes
2p petrol increase frozen for six months
More cash for schools and hospitals

Mr Brown also cut VAT from 17.5% to 5% on nicotine patches and similar products and said duty on spirits was being frozen.

Mr Brown announced more money for education in England, which he said would narrow the gap in funding between pupils in state and private schools, although the real terms increase, at 3%, will be lower than in previous years.

There will also be an increase from 2bn to 8bn in help for people who lost their pensions when their employers went bust before 2005.

The NHS in England will get an extra 8bn over the coming year, with extra health spending for the whole of the UK to rise by 10bn.

BBC Political Editor Nick Robinson said Mr Brown's surprise announcement of a tax cut "produced huge roars on the Labour benches and awkward gasps on the Tory benches".

But, he added, once all the changes in the Budget had been taken into account, "there's no net tax cut - it's neutral".

Anyone earning between about 17,000 and 40,000 a year will be better off
Those earning less than about 17,000 will lose from the abolition of the 10p tax rate but they should more than claw it back from working tax credit
Those on 43,000 will pay 20 a year more in tax
All figures for 2008. Source: PriceWaterhouseCoopers

In his Budget response, Conservative leader David Cameron said Mr Brown was "the chancellor who has taken one tax down but put 99 up".

Mr Cameron told Mr Brown that average families were paying 1,300 more "because of your Budget decisions".

Senior Tory MP John Redwood described the changes as a "con-trick".

And Shadow Chancellor George Osborne said later that the 2% cut in income tax would be cancelled out by the abolition of the 10p rate.

"Of course with Gordon Brown you shouldn't pay attention to what he says, you've got to actually look at what he's doing," he told the BBC.

"And all that money he's giving to people in that apparent income tax cut, he is actually taking back off them with income tax increases."


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He said someone with a salary of between 14,000 and 16,000 a year would probably see their income tax bill go up.

Liberal Democrat leader Sir Menzies Campbell said it was "a Budget of missed opportunities" and abolishing the 10p starting tax rate meant income tax would be increased for many people.

"We are asking the poor to subsidise the rich," Sir Menzies told MPs.

Mr Brown began his speech by telling MPs the British economy was growing, alongside the US, faster than all the other G7 economies - between 2.5% to 3% for 2008 and 2009.

He said inflation - which has increased this week to 2.8% raising the prospect of an increase in interest rates - would fall to 2% next year and carry on falling.

"This is a Budget to expand prosperity and fairness for Britain's families - and it is built on the foundation of the longest period of economic stability and sustained growth in our country's history," he told MPs.

He also focused on the environment, with a cut in road tax for the least polluting cars from 50 to 35 as well as the rise in tax on "gas guzzling" vehicles.

But he rejected Tory calls for VAT to be added to airline tickets, saying the proposals had not been "thought through".

Golden rule

He said more cash would be made available for public services from efficiency savings and the 36bn sale of government assets, ahead of the publication of the Comprehensive Spending Review, which will take place in the autumn rather than July as previously expected.

A pretty good budget all round...I can't help thinking that a snap autumn election might be on the cards
Edward, London

The level at which inheritance tax kicks in will increase in stages from 285,000 to 350,000 in 2010.

Mr Brown also said the starting threshold for the top rate of income tax will rise to 43,000 from 2009 - but he also raised the ceiling on national insurance contributions to the same level.

Intelligence and counter-terrorism will receive an additional 86m for the coming year.

But there will be real-terms cuts totalling 2bn in the budgets of several departments, including work and pensions, HM Revenue and Customs, the Cabinet Office, the Treasury along with the Department of Constitutional Affairs and the Attorney General's departments.

In a Budget which looked back over his near-10 years as chancellor, Mr Brown said that over the economic cycle, current spending and revenues show a surplus of 11bn, which he said met his Golden Rule.

But the BBC's Economics Editor Evan Davis said for the "umpteenth budget in a row...the Chancellor has had to confess that his public finance projections are worse than he thought they'd be".

Mr Brown's Budget came the day after the former head of the civil service accused him of "Stalinist ruthlessness".


Mr Brown tried to laugh off the comments at the start of his speech, but he was reported to be "incandescent" on Tuesday, when former head of the civil service, Lord Turnbull, made them in a newspaper interview.

It is expected to be the chancellor's final budget - if he takes over from Tony Blair, as expected, within the next few months.

Mr Blair has said he will step down by September, and is expected to announce his resignation shortly after the Scottish and Welsh elections on 3 May.

Budget analysis and reaction

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