Bang bang - we've shot your fox, Alan Johnson, Secretary of State for Work and Pensions, gesticulated across the floor of the house at the Opposition yesterday as the Chancellor announced council tax rebates for pensioners worth £200 per household. Only of course he hasn't, or rather he has only partially countered Tory proposals for reducing the council tax burden on pensioners.
There were two biggish pre-election bribes in the Budget. The other - raising the threshold at which stamp duty becomes payable on house purchases to £120,000 - was aimed at first-time home buyers. As ever, it is business that is being required to foot the bill, through the closing of tax avoidance loopholes, by getting rid of the stamp duty exemption in disadvantaged areas, and by forcing Big Bad Oil to pay its corporation tax early.
Yet the council tax rebate, which will cost the Government about £800m, is just a one-off that on present plans won't be repeated in later years. It's not as big as the Tory proposal, which is to repay half the council tax bill up to a maximum of £500, and it seems not to be as permanent.
Why is this? Why not go the whole hog and entirely steal the Tories' clothes, on this and whatever other tax promises are being made? The word prudence made a reappearance in the Chancellor's speech this year after a prolonged absence, as did boom and bust, Mr Brown's other two favourite catch phrases from times past. This provides a clue.
The politics of this Budget is that the public finances and the economy should continue to be seen as safe in the Chancellor's hands, in contrast to supposedly ill-thought-out Tory proposals for slashing taxes and hoping the difference can be paid for by cutting waste and inefficiency in the public sector. Mr Brown's tax and spending plans are built on firm foundations, we are asked to believe; those of the Tories on sand.
It's hard to recall a precedent for the incumbent government going into an election with a Budget that envisages "a modest fiscal tightening", yet this was the claim that Mr Brown made yesterday.
So if there are two whacking great giveaways at the heart of the Budget, how does the Chancellor square the circle?
On the other side of the ledger, the biggest plus for this year is an extra £1.1bn from oil companies, won from early payment of corporation tax. This is not the much trumpeted windfall profits tax on profiteering oil you might think, but a timing adjustment.
The time oil companies have to pay their corporation tax is being foreshortened so as to bring it into line with the way petroleum revenue tax is paid. This is a smoke and mirrors trick, an accounting fiddle in essence, which the Chancellor has used before to make the numbers add up. Some years ago, Mr Brown introduced the principle of quarterly payment of corporation tax, again allowing a considerable one off boost to revenues. Now he's doing it again, at least as far as the oil companies are concerned, this time under the guise of tax simplification.
The other single big plus is the £340m gain the Government gets (rising to £370m after three years) by ending the stamp duty exemption for commercial property in "disadvantaged areas". This was an exemption the Chancellor introduced less than two and a half years ago as a way of encouraging business to move into areas of high unemployment. We are now told that this was always intended as time-limited, though it is hard to recall anyone saying this at the time. Bizarrely, its "expiry" is included in the Budget documents under the heading of "meeting the productivity challenge". Even the Chancellor would struggle to sustain the argument that more tax means higher productivity.
Then finally there's an extra £600m, rising to £1bn after the first year, from anti-avoidance measures, the great bulk of which are aimed at business. It's hard to have any sympathy for tax-avoiders. What mercy, for instance, can the already super-rich expect when they use such loopholes to avoid even the extraordinarily undemanding 10 per cent capital gains tax levied on the sale of private businesses?
Yet big multinationals in deciding where to locate their operations don't look at the world in these terms. For them, anti-avoidance legislation is just a way of taxing business more heavily.
Mr Brown has addressed the industry of public finance analysts who worry about whether he will or won't break his own golden rule with this Budget, but he is only doing so by imposing an ever heavier tax burden on business. Most commentators have written that it is not this Budget we need to bother ourselves with on the tax front, but the one that comes after the election, when taxes will have to rise to pay for the Government's spending commitments. In fact, some of the tax hit is already there, both for this year and next, but it is done via the back door by taxing business more heavily.
We can only assume that the CBI had not properly marshalled the detail of Mr Brown's weighty package of documents when it yesterday welcomed "a balanced Budget which looks beyond short-term political concerns to the genuine long-term needs of UK plc". What is it about the CBI that it seems these days to amount to little more than the industrial wing of the Labour Party?
I doubt many members would share Sir Digby Jones's enthusiastic support for so much of what the Chancellor says and does. The CBI director general should stop "applauding" and start worrying about the loss of competitiveness that higher business taxation will undoubtedly bring about.Reuse content