THE SUN claimed that Gordon Brown's budget last week 'smacks of red blooded socialism and redistribution of wealth'. As ever, the paper was completely wrong. Brown made only the smallest move towards increasing tax to give more to the NHS.
He put 1p extra on national insurance. Even this ends up hitting ordinary people far harder than the rich. You have to pay national insurance if you earn between £89 a week and £595 a week. But any income over that escapes national insurance completely. A manager on £150,000 faces a much lower overall rate of national insurance than a postal worker on £15,000.
Brown did not make the most obvious reform-raising or abolishing that ceiling on contributions. If he really aimed to raise money from those who can afford it, he would have put up the top rate of income tax. This affects people who get more than £34,500 a year-£664 a week. Even under Tory leader Margaret Thatcher's first eight years in government they used to pay 60 percent tax.
They pay just 40 percent under New Labour. Brown gave handouts to big business which were announced before the budget. Over £850 million is going directly into profits from the Treasury. 'High earners escaped relatively lightly compared with pre-budget fears,' said the Financial Times with glee. The paper's columnist Philip Stephens added, 'The budget was not Old Labour socialism. The pips are not squeaking yet for the rich, and anyone with share options has been given a big windfall bonus through the cuts in capital gains tax. By the end of this parliament public spending as a share of national income will still be in line with the proportions seen in the heyday of Thatcherism during the 1980s.'
Brown made another huge concession to bosses over shares and share options. His 2000 budget meant bosses only had to pay 10 percent tax (instead of the usual 40 percent) on shares they had held in their companies for four years or more. Brown has now halved this to two years. They can therefore cash in the shares much more quickly.
Matt Barrett of Barclays has share options worth £13.9 million. If he cashes them in after two years he will pay only 10 percent tax-£1.39 million. He would either have had to wait four years or pay 40 percent tax, £5.56 million, before Brown's last budget. But a worker on an annual income of £10,700 will be £85.80 a year worse off thanks to Brown.
This is because Brown also froze next year's personal tax allowances for everyone except the elderly. This is the part of your income on which no tax is paid. Brown's move will increase the tax take from 23.8 million taxpayers. But it will have the biggest impact on the lowest paid, as more will get drawn into the tax net as their earnings rise.
The move doesn't mean a big gain for pensioners. Although they have large rises in their personal allowances, only one third of pensioners have enough income to pay tax at all.
BUSINESSES PAID £3.6 billion less in corporation tax than in 1996-7. If Brown had increased the corporation tax rate from 30 to 40 percent he would have raised £12 billion a year, more than he got from the national insurance rise.
THE LONG term unemployed are to be sent on compulsory training courses. Those living in the worst blackspots will be forced to take job offers or lose benefit.
THERE IS now a bewildering array of tax credits. The figures quoted for how much they deliver ignore the fact that they are counted as income. This means claimants lose some or all of the benefits they claim.
BROWN'S increase in the threshold for inheritance tax was far more than the rate of inflation. Now nobody pays inheritance tax unless they leave over £250,000. A maze of exceptions and dodges mean that only the very stupid rich end up paying it.
NHS money tied to PFI
BROWN'S INCREASE in spending on the NHS comes after years of deliberate cutbacks in public investment. British health spending is still behind the European average. The money is attached to more privatisation, harsh attacks on workers, and the return of the Tories' internal market in health.
The system will effectively reward private hospitals and create a two-tier health service. Hospitals that 'do well' will attract more money by treating more patients. Others will 'fail' and become 'sink' hospitals, condemned to be 'named and shamed'.
It will be like the school system, with people competing to get into 'good' hospitals. This makes a mockery of Brown's promise that you can now 'choose' your hospital. In reality a patient in, say, London will be told that they can have treatment quicker if they 'choose' to go to, say, Newcastle or Birmingham. 'We will extend the Private Finance Initiative to other parts of the health and social care system,' says health secretary Alan Milburn's document 'Delivering the NHS Plan.' Health workers are said to be 'inflexible'.
Future talks over national employment contracts will be undertaken by NHS employers rather than the Department of Health. This clears the way for bosses to force through different pay and conditions in local areas. Blair said on TV last week that he is 'ready to take on the unions' to push this privatisation programme through.
Their lies over tax rise
THE HEAD of the bosses' CBI, Digby Jones, denounced the rise in national insurance contributions from employers as 'a tax on employment'. But most firms will hardly notice the difference. Safeway, the supermarket giant, employs 95,000 people.
Some 40 percent of those are part timers who do not get the minimum £89 a week after which the extra national insurance has to be paid. Another 25 percent earn so little above £89 that the increase will be negligible. 'At the end of the day it will make little or no difference to our recruitment strategy, which will continue to be driven by the needs of the business,' admitted a Safeway spokesperson.
Domino's Pizza directly employs just 755 people at a total cost of £8.76 million.
Even if the company had to pay a full 1 percent more on the total bill, this would be an additional £87,600. 'We had profits of £2.8 million last year, so £87,600 wouldn't have much of an impact,' said Stephen Hemsley, chief executive of Domino's.