Letter: Read the Budget small print

Sir: Your comments on the "people's Budget" (3 July) echo the current mood of optimism. There are indeed positive features to the Budget - notably the work programme - which my party also applauds. But we have not lost our critical faculties.

Your leading article suggests you may not have read the small print on additional education and health spending. It is for the next financial year, not this, and will not, as you hope, ease the immediate funding problem in schools and hospitals. You have forgotten inflation. The upward revision in inflation from 2 per cent to 2.75 per cent alone raises the cost of health and education this year by pounds 320m and pounds 300m respectively, for which there is no additional provision. This additional inflation will account for over half the extra spending pledged next year. It is difficult to believe that even the Conservatives would have done any less.

You airily dismiss the Liberal Democrats' spending proposals as "a mite by-the-by" though the annual yield from one penny in the pound on income tax is considerably in excess of the ad hoc additional allocation Gordon Brown is offering. We believe moreover that the public would support the idea of a modest increase in direct taxation to pay for education if the Government would have the courage to pose the problem in that way.

Outside health and education there are real cuts in store. And local authority budgets are still capped, despite the need to top up pension funds following the loss of tax credit on ACT. Those people who looked to the Chancellor to deliver better services may not be euphoric for very long.

VINCENT CABLE MP

(Twickenham, Lib Dem)

Liberal Democrat Financial Spokesman

House of Commons

London SW1