Wednesday, March 21, 2007

UK - Budget 2007

The Chancellor of the Exchequer, Gordon Brown, today delivered his 11th Budget since Labour came to power in 1997. He claimed that UK had grown faster than other countries in the Eurozone. Britain he said, has the G7’s fastest growing business investment. Investment was likely to rise by 7% in the coming year. With regards to inflation he said it was on target for 2008-2009. Economic growth would rise around 2.5% to 3% over the same period. And employment was up 220,000 over 2006.

So came the yearly budget, which the general public wait to see how much their taxes are likely to rise. Sky News and BBC 24 as well as BBC parliament all covered the Budget Live. Even terrestrial television had special Live coverage on BBC2.

After the series of figures he said showed the strength of Britain’s economy, Gordon Brown set out his long list for spending, tax hikes and tax cuts. Spending overall was up for education, defence and healthcare. Smokers, drinkers and drivers were all set to see price rises for their habits. But there were a few positive proposals.

He promised an extra £400 million to be made available to the army and a rise of spending on counter-terrorism by £86 million. A further £2.25 billion was also set aside for the intelligence services. This comes on the back of increased terror threats to the UK as well as an overstretched army which patrol Iraq and Afghanistan in the continuing War on Terror.

Healthcare would increase with the NHS being promised a further £8 billion. Investment in science would increase to £6.3 billion by 2010 and education spending would increase to £74 billion in 2010.

Corporation tax would be cut from 30p to 28p in April 2008. Small companies’ tax rate would go up from 20p to 22p in 2009.

The Chancellor said it was “right today to proceed with major reforms”. And one of the major changes was taxation and spending with respect to the environment.
Gordon Brown said he would announce a competition for ‘carbon capture & storage’. He set aside £800 million for an “environmental transformation fund”. He said that homes were responsible for a quarter of Britain’s carbon footprint and set out a number of initiatives to decrease this. He proposed budgets of £4,000 for pensioners to insulate their homes. There would also be no stamp duty on zero-carbon homes. He also proposed to reduce VAT to 5% on energy saving products and £240 million environmental incentives for firms. With regards transport, the Chancellor said he was aiming for new cars reducing their emissions to 100 grams per km. Bio-fuel use should also be increased to 5% in 2010 to 10% in 2020, with a Bio-fuel duty differential of 20p extended to 2010. In addition he said that car tax band differentials would be widened. Fuel duty would rise by 2p per litre over next 2 years, but this years increase would be deferred until October. Car tax for some vehicles would rise to £300 per annum. In 2008 this would rise to £400. Least polluting cars would have car tax reduced by up to £50. Rain forest destruction would be tackled by an allocation of a £50 million spend. However he did not put VAT on flights, something which many expected.

Drinkers and smokers saw increases with beer, cider, wine and cigarettes all seeing tax rises. From Sunday, beer would see an increase of 1p per pint [568ml] while cider would increase by 1p a litre. Wine and sparkling wine would also see an increase of 5p and 7p per bottle respectively. Smokers would be paying more for a packet of 20 cigarettes. Eleven pence would be added to a packet, but said that as an incentive to help people quit smoking he proposed a 5% VAT reduction on nicotine replacement products. For gin and whiskey drinkers there was small celebration with no tax rise for the 10th budget in a row.

Homeowners were given a tax break with property inheritance tax thresholds rising from £285,000 to £350,000 by 2010. There would also be extra help for first time buyers. Child benefit would increase by £20 per week in order to help “lift 200,000 children out of poverty”. Pensioners’ tax free allowance would increase to £9,770. The top tax threshold would also increase to £43,000 p/a.
“This is a budget for Britain’s families; this is a budget for the future”, the Chancellor said before announcing an income tax reduction. As he left the podium he announced a drop in the basic rate of income tax from next April by 2p – from 22p to 20p.

The leader of the Conservative Party accused Brown of being an “out of date politician” and demanded to know “where has the money gone?” David Cameron said Gordon Brown was a “Chancellor who has taken one tax down but put 99 taxes up”.

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