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Parties step up attack on Budget Brown denies Budget 'con trick'
(10 minutes later)
Gordon Brown has been accused of giving with one hand, and taking away with the other in his Budget, which included a 2p cut in basic income tax. Chancellor Gordon Brown has rejected Conservatives' claims his Budget tax changes amounted to a "con trick".
By also scrapping the 10p bottom rate of tax, the Tories accuse him of a "con trick" while the Lib Dems say he is asking the poor to subsidise the rich. Mr Brown cut 2p off the basic tax rate, but he also axed the 10p starter rate, and changed the National Insurance limits, leaving few people better off.
Lib Dem leader Sir Menzies Campbell said there was a "missed opportunity" to rebalance the tax system. The Tories said lower earners would pay more income tax, while the Lib Dems say "the poor are subsidising the rich".
Mr Brown announced the income tax rate would be cut to 20p from April 2008. But Mr Brown said the reforms had simplified the system and were "in the best interests of the country".
BUDGET HIGHLIGHTS 2p off basic rate of income tax10p starter rate abolished 2p cut in corporation taxGas guzzling car duty up to £300 this year and £400 next Beer and cider up 1p, wine 5p, spirits duty frozen11p on cigarettes2p petrol increase frozen for six monthsMore cash for schools and hospitals Budget at-a-glance BBC experts' blogBUDGET HIGHLIGHTS 2p off basic rate of income tax10p starter rate abolished 2p cut in corporation taxGas guzzling car duty up to £300 this year and £400 next Beer and cider up 1p, wine 5p, spirits duty frozen11p on cigarettes2p petrol increase frozen for six monthsMore cash for schools and hospitals Budget at-a-glance BBC experts' blog
In his 11th Budget, Mr Brown said his stewardship of the economy meant he could lower the basic rate to its lowest level for 75 years. He told BBC Breakfast the average family would be £5 a week better off as a result of the income tax changes.
Other tax and benefit changes, including increases in working and child tax credits, would mean that the point at which a family with two children started paying income tax would rise from £22,500 a year to £24,250. On Wednesday Mr Brown announced the income tax rate would be cut to 20p from April 2008.
In his 11th Budget Mr Brown said his stewardship of the economy meant he could lower the basic rate to its lowest level for 75 years.
The surprise announcement, at the end of his speech, sought to "rewrite the history of the Brown decade at the Treasury", said BBC political editor Nick Robinson, adding the chancellor had not previously been noted as a "tax cutter".The surprise announcement, at the end of his speech, sought to "rewrite the history of the Brown decade at the Treasury", said BBC political editor Nick Robinson, adding the chancellor had not previously been noted as a "tax cutter".
The Budget is expected to be Mr Brown's last as chancellor, as he is the favourite to succeed Tony Blair as prime minister within the next few months.The Budget is expected to be Mr Brown's last as chancellor, as he is the favourite to succeed Tony Blair as prime minister within the next few months.
He has concentrated, not surprisingly, on his own political succession Sir Menzies Campbell WINNERS AND LOSERS Anyone earning between about £17,000 and £40,000 a year will be better offThose earning less than about £17,000 will lose from the abolition of the 10p tax rate but they should more than claw it back from working tax creditThose on £43,000 will pay £20 a year more in tax All figures for 2008. Source: PriceWaterhouseCoopers
It was seen by some as a set-piece statement, setting the stage for his anticipated takeover at Downing Street.It was seen by some as a set-piece statement, setting the stage for his anticipated takeover at Downing Street.
Shadow Chancellor George Osborne described the Budget as a "con trick", hitting low earners.Shadow Chancellor George Osborne described the Budget as a "con trick", hitting low earners.
"Their income tax bill went up yesterday and I don't think listening to that Budget they would have thought that," he told the BBC Radio 4's Today programme."Their income tax bill went up yesterday and I don't think listening to that Budget they would have thought that," he told the BBC Radio 4's Today programme.
No-one "would have worked out the whole thing is a con-trick", he added.No-one "would have worked out the whole thing is a con-trick", he added.
Lib Dem leader Sir Menzies said the chancellor had missed an opportunity to build a fairer, greener and more prudent Britain.Lib Dem leader Sir Menzies said the chancellor had missed an opportunity to build a fairer, greener and more prudent Britain.
"He has spurned all of these opportunities. He has concentrated, not surprisingly, on his own political succession," he said."He has spurned all of these opportunities. He has concentrated, not surprisingly, on his own political succession," he said.
"The 2p cut in the basic rate is welcome, but let us be clear, this is an income tax for the wealthy dressed up as a tax cut for the poor.""The 2p cut in the basic rate is welcome, but let us be clear, this is an income tax for the wealthy dressed up as a tax cut for the poor."
'Tax con' 'Oppressing'
BBC economics correspondent Hugh Pym said that the changes meant someone on £14,000 a year would pay an extra £90 in tax and National Insurance - but that would be offset by claiming working tax credit.BBC economics correspondent Hugh Pym said that the changes meant someone on £14,000 a year would pay an extra £90 in tax and National Insurance - but that would be offset by claiming working tax credit.
WINNERS AND LOSERS Anyone earning between about £17,000 and £40,000 a year will be better offThose earning less than about £17,000 will lose from the abolition of the 10p tax rate but they should more than claw it back from working tax creditThose on £43,000 will pay £20 a year more in tax All figures for 2008. Source: PriceWaterhouseCoopers
Someone on £25,000 a year would pay £128 less, while someone on the higher tax rate of £43,000 would pay an extra £20.Someone on £25,000 a year would pay £128 less, while someone on the higher tax rate of £43,000 would pay an extra £20.
Asked about the abolition of the lowest rate of 10p, Chief Secretary to the Treasury, Stephen Timms, told BBC Radio 4's PM programme: "We're introducing a fairer system to get extra help to families and pensioners and to help make work pay. SNP leader Alex Salmond said: "I think the disappointing thing is, if he was going for a huge reduction in tax, then he should have gone for council tax which is the one that's so unfair and oppressing so many people across the country."
"And this isn't a case of smoke and mirrors, overall there's a £2.5bn reduction in the personal tax announcements in this budget."
But SNP leader Alex Salmond said: "I think the disappointing thing is, if he was going for a huge reduction in tax, then he should have gone for council tax which is the one that's so unfair and oppressing so many people across the country."
Other measures announced include more money for education and the NHS in England, intelligence, counter-terrorism and defence, as well as for people who lost their pensions when their employers went bust before 2005.Other measures announced include more money for education and the NHS in England, intelligence, counter-terrorism and defence, as well as for people who lost their pensions when their employers went bust before 2005.
BUDGET CALCULATOR Work out how the 2007 budget will affect youBUDGET CALCULATOR Work out how the 2007 budget will affect you
Road tax was reduced for the least polluting cars and increased on "gas guzzling" vehicles.Road tax was reduced for the least polluting cars and increased on "gas guzzling" vehicles.
Corporation tax for businesses was also revamped - the headline rate from April 2008 was cut from 30% to 28%, but there was dismay among smaller firms that the rate they pay would rise from 19% to 22% in 2009.Corporation tax for businesses was also revamped - the headline rate from April 2008 was cut from 30% to 28%, but there was dismay among smaller firms that the rate they pay would rise from 19% to 22% in 2009.
The level at which inheritance tax kicks in will increase in stages from £285,000 to £350,000 in 2010.The level at which inheritance tax kicks in will increase in stages from £285,000 to £350,000 in 2010.
And the starting threshold for the top rate of income tax will rise to £43,000 from 2009 - but the ceiling on national insurance was also raised.And the starting threshold for the top rate of income tax will rise to £43,000 from 2009 - but the ceiling on national insurance was also raised.
Robert Chote, director of the Institute for Fiscal Studies, said the Budget had confirmed that "the next few years will see the tightest squeeze on public spending for a decade".Robert Chote, director of the Institute for Fiscal Studies, said the Budget had confirmed that "the next few years will see the tightest squeeze on public spending for a decade".
But he said, having established his mark on the machinery of monetary policy and planning public finances, Mr Brown was now staking his claim to being a tax reformer, by simplifying income tax and national insurance.But he said, having established his mark on the machinery of monetary policy and planning public finances, Mr Brown was now staking his claim to being a tax reformer, by simplifying income tax and national insurance.