From bus travel to council tax: the truth behind the Budget

Click to follow
Indy Politics

All that glisters is not gold, and not all of the pre-election "sweeteners" in Gordon Brown's Budget are as new as the Government would like them to appear. Not all his pledges are as good as they seemed on Wednesday evening. The tax rises aimed at the business sector were mentioned in passing. The devil, as ever, is in the detail.

All that glisters is not gold, and not all of the pre-election "sweeteners" in Gordon Brown's Budget are as new as the Government would like them to appear. Not all his pledges are as good as they seemed on Wednesday evening. The tax rises aimed at the business sector were mentioned in passing. The devil, as ever, is in the detail.

Bus travel Mr Brown offered free bus travel for every pensioner. But that begins next year and applies only off-peak. For pensioners in Scotland, Wales, Northern Ireland and parts of England, it is not new. Londoners have had free travel for 21 years. In Nottingham, the beneficiaries are known as "the twirlies" because bus-drivers frequently have to tell them they are trying to travel "too early".

Stamp duty The Chancellor says doubling the stamp duty threshold to £120,000 will help first-time buyers. But although an extra 300,000 properties now fall under the level at which the tax becomes payable, the increase will be of limited help. If the threshold had been raised in line with house-price inflation it would stand at £150,000.

Inheritance tax The threshold rises will take the value at which estates may be passed on tax-free from £263,000 to £300,000 by 2007-08. But a massive potential IHT liability awaits most homeowners. Treasury figures show 14 per cent of all property sales now are above the threshold, compared to only 3 per cent 10 years ago. To keep up with house-price inflation it would now be £390,000.

ISAs The Chancellor announced tax-free individual savings allowances would continue until at least 2010. But there will be a review of the ISA system next year, which could spell the end of the shelter. And ISAs remain less generous than the Peps and Tessas they replaced. The annual ISA investment limit is just £7,000, compared to £9,000 in Peps and up to £1,800 a year over five years in Tessas.

Gay couples From December, same-sex couples who register their relationships get similar tax breaks to married couples. This includes the right to transfer assets to each other tax-free, and to leave an estate of any value to each other the tax. But gay couples lose their right to tax-free gains on property if both partners own their own home.

Tax credits Benefits such as the child tax credit are to rise in line with national average earnings in 2005-06, which will leave many families better off. But the usual income-tax allowances and thresholds are going up only in line with inflation. Since earnings rise more quickly than prices, more people will move into higher tax brackets, adding to their income-tax bills.

Income tax Although Mr Brown stuck to his election manifesto promise not to raise the basic rates of income tax, more people will pay more tax. The tax bands were raised only in line with inflation rather than average earnings. So as incomes rise, more people end up in the top rate.

Science budget The business sector, which is funding the handouts, had several policy reannouncements. The Chancellor confirmed the UK would develop a national network for stem-cell research and reannounced £40m of investment by the Research Council. He confirmed the expansion of the R&D tax credit for medium-sized companies first announced in the pre-Budget report.

Tax avoidance The Chancellor pencilled in £2.7bn of savings within three years from nine crackdowns on tax avoidance, although none is in force yet. Economists say is hard to estimate how much these will net. An army of tax consultants will redeploy to find new loopholes to offset the loss to clients.

Council tax The Chancellor claimed his £200 off council tax bills for pensioner households was "worth more to more pensioners than all other proposed schemes". But the Institute for Fiscal Studies says that costs £800m compared with the Tory deal costing £1.3bn and the abolition of council tax by the Liberal Democrats costing £2.1bn.

Education The Treasury says the direct grants rising to £36,000 for primary schools and £115,000 for secondaries are a guideline rather than a guarantee of what schools will get.

That three- and four-year-olds will have up to 15 hours a week of free nursery education by 2007, was announced last year.

Tax rises The Chancellor said: "I am aligning the timing of oil companies' corporation tax payments more closely with petroleum revenue tax." The Government requires earlier payment of £1.1bn from North Sea oil giants, costing them £25m a year in lost interest.

Comments