Brown's radical Budget

Gordon Brown will signal a long-term overhaul of the tax and benefit systems in next Wednesday's Budget. He will also announce radical plans to reshape the entire Budget process.

Beyond the central measures of his welfare-to-work scheme for the young and long-term unemployed, financed by the windfall tax, the Chancellor will outline his intention to improve work incentives and reduce the burden of taxation on the low-paid.

The Budget will also emphasise the use of the tax system to cut back on pollution and encourage energy-saving. The Chancellor and John Prescott, Deputy Prime Minister, yesterday met in private to discuss the inclusion of "green taxes" which will form a key part of the Budget.

They discussed a hike in the duty on petrol and diesel, and it is believed there will be increases in other environmental taxes, such as the landfill tax, while VAT on loft insulation is expected to be cut in line with the reduction in VAT on domestic fuel from 8 per cent to 5 per cent.

Senior ministers believe that Britain, like California, will not object to taxes that are seen as environmentally friendly, making Mr Prescott's superministry, in charge of the environment, transport and the regions, a vehicle for new tax revenues.

Tony Blair staked out the Government's commitment to reducing greenhouse gases in his speech to the United Nations on Monday, in a clear signal that more green taxes are on the way. The long-term options being considered include road tolls, road pricing, and replacing the road fund licence with higher petrol duties.

The Chancellor is expected to confirm the Government's manifesto pledge to introduce a 10p starting rate of income tax.

Mr Brown will indicate plans to shift away from expensive tax reliefs and allowances that disproportionately help the well-off.

The most vulnerable of these are mortgage interest tax relief and the married couples' allowance, which between them cost pounds 5.5bn a year. Tax relief on pension contributions, which channels about pounds 6bn a year to top rate taxpayers, is a longer-term candidate for reform. The most likely alternative would be to introduce a flat-rate tax credit on pension contributions.

This ties in with the approach being taken by the welfare-to-work task force, headed by Martin Taylor, chief executive of Barclays. The Chancellor favours boosting low incomes through tax credits in order to get around the way the loss of benefits reduces the incentive to work.

Welfare-to-work will be the core theme of the Budget, and Mr Brown will give details of the training and education schemes to be offered to 18- to 25-year-olds with the money raised from the windfall tax on the privatised utilities. The Chancellor is expected to confirm the scrapping of universal child benefit for 16- to 18-year-olds, in return for means tested educational allowances.

With an emphasis on creating jobs and boosting investment in the long term in his Budget speech, Mr Brown is expected to encourage companies to retain profits for investment rather than paying them as dividends by ending the dividend tax credit claimed by pension funds. The move will harm profits in the short term, but the proceeds could be channelled back to companies.

The Chancellor will set out a new approach to future Budgets. He will draw a parallel between the transparency he has introduced to the setting of interest rates, by making the Bank of England independent and accountable, and the need for the same kind of openness about taxes and spending.

In his speech on Wednesday he will also set out the Government's intention to run a macroeconomic policy that delivers stable growth and low inflation, setting this in the context of the need to remain competitive in a global market.

The recent assessment of the Treasury's economic assumptions by the National Audit Office made it plain that Mr Brown has taken a cautious approach to public finances. Actual government borrowing this year and next could well be lower than the Budget "Red Book" will indicate because the economic boom will boost tax revenues.

Don Macintyre, page 19

News
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Sport
sportDidier Drogba returns to Chelsea on one-year deal
News
people
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Louis van Gaal would have been impressed with Darren Fletcher’s performance against LA Galaxy during Manchester United’s 7-0 victory
football
Voices
The new dawn heralded by George Osborne has yet to rise
voicesJames Moore: As the Tories rub their hands together, the average voter will be asking why they're not getting a piece of the action
Sport
Dejan Lovren celebrates scoring for Southampton although the goal was later credited to Adam Lallana
sport
News
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Life and Style
People may feel that they're procrastinating by watching TV in the evening
life
Sport
Rhys Williams
commonwealth games
News
Isis fighters travel in a vehicle as they take part in a military parade along the streets of Syria's northern Raqqa province
i100
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Life and Style
fashionLatex dresses hit the catwalk to raise awareness for HIV and Aids
Travel
travel
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

Commercial Litigation Associate

Highly Attractive Package: Austen Lloyd: CITY - COMMERCIAL LITIGATION - GLOBAL...

Systems Manager - Dynamics AX

£65000 - £75000 per annum + Benefits: Progressive Recruitment: The client is a...

Service Delivery Manager (Software Development, Testing)

£40000 - £45000 per annum: Ashdown Group: A well-established software house ba...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform