Business hit for 87% of tax rises

Companies are to pick up nearly 90 per cent of the net extra taxes imposed by the Labour government, undermining its hard-won reputation as a business-friendly party.

The figure comes from economists at PricewaterhouseCoopers, the accountancy firm, which calculated the fiscal burden on business after Gordon Brown's Budget last week.

Of the tax increases announced on Wednesday last week, which amount to £7.6bn a year by 2004-05, £6bn will come from business.

Together with other tax rises brought in by Labour since 1997 this means that by the 2004-05 fiscal year, business will bear 87 per cent of the £8.6bn a year net increase in taxation.

John Hawksworth, the head of macroeconomics at PwC, said: "The impact of this Budget is to heavily load taxes onto business. I was surprised. He obviously felt business should bear more of the strain."

However, Mr Hawksworth said that, in practice, business would seek to pass on the extra tax to workers or consumers. For example if a company had planned to give workers a 4 per cent pay rise next year it could limit the rise to 3 per cent. This would pass the entire cost of the 1 per cent rise in national insurance contributions on to that company's staff.

Mr Hawksworth said: "The national insurance measure was another stealth tax, as it appears to be on business yet it comes through to individuals. It's just more subtle than the other stealth taxes."

Nor did last week's Budget mark the end of the current tax-raising programme. While the National Health Service has a five-year spending plan, the Chancellor's Budget only provided for the first three years of that.

In addition to the plan for the health service, there are issues such as education, pensions, crime and long-term care, which the government may choose to tackle with other big tax-and-spend programmes.