Cameron responds to Budget...

Very difficult job for Cameron after Brown's announcement of a 2p cut in income tax (from next April).  Cameron responded by saying that the Chancellor had, after all, accepted the Tory idea that you could cut taxes and raise spending through the proceeds of growth.  He said that Brown only normally cut taxes before an election - this time he must have his mind on the Labour election.  This budget, he said, would not compensate for all of Gordon Brown's tax rises of recent years.

The Tory leader kept asking the question: Where has all the money gone?

Best line from Cameron: "The Chancellor who has taken one tax down but put 99 up."

Got to go now.  More later...

PS The guys at the TPA clapped as Brown concluded his speech.  All this political cross-dressing is very confusing.

4pm update - BEST TWO STALIN JOKES FROM CAMERON'S SPEECH:

• "The frontbench are all standing for the Deputy Leadership because they know from history that it is the best way to avoid the Gulag."
  
• Gordon Brown has "the tendencies of Stalin and the poll ratings of Michael Foot."

Comments

[Waldemar Gardner]

He hasn't cut taxes- don't fall for it.

Scrapping the 10% rate means a sizable increase in income tax, especially for the poorest.

What a tit.

['Disgusting' DVA]

People are forgetting the number one maxim that must always apply to a Gordon Brown budget: the devil is in the detail.

As others have pointed out, he may have cut the basic rate BUT the lower rate has also been scrapped.

This Chancellor, who purports to represent the party of the working classes, has well and truly shafted lower-income earners - and though this isn't really an electoral furrow to be ploughed by the Conservatives, we really ought to draw more attention to this.

[Michael McGowan]

As well as scrapping the starting rate of income tax, he seems to have put up National Insurance quite significantly as part of a package to offset the "eye-catching" cut in basic rate income tax. I don't believe that this is a real tax cut.

[Mark Wadsworth]

Well spotted Waldemar and Michael! Increasing starting band 10% to 20% is a tax hike of £200 a year that will hit lower earners disproportionately more.

DC was great though. To the point and funny.

[CrashAndBurn]

Oh dear. Panic stations over at Doughty Street as shot foxes start to pile up on the pavement (they have to be shot becuse you are not allowed to hunt them with dogs)

[Londoner]

The alignment of NI with the top of the basic rate band may indeed raise quite a lot of revenue particularly as he is increasing the size of the basic rate band; and we don't know the detail of what "alignment" means.

[Ben Redsell]

Increasing Lower Rate tax by 10% will really damage those on low incomes - not all of whom qualify for Working Tax Credits. This budget had started to fall apart within minutes of Broon sitting down.

This is the John Smith budget from 1992.

[Praguetory]

With the replacement of the 10% rate with a 20% rate the poverty trap becomes even steeper for the poorest.

[Donal Blaney]

No panic here at 18 Doughty Street: the headline grabbing income tax and corporation tax cuts are no such thing!

[Rickytshirt]

It really irks me that everyone is reporting this as a tax cut when it's costing me an extra approx £500pa from my £14,222pa, not to mention all of the other tax increases.

[Henry Cook]

The headlines SHOULD read tomorrow:

Basic rate of income tax raised by 10%
Middle rate of income tax cut by 2% to make a single lower band at 20%

Those who were paying the 22% rate also used to pay 10% on the first few thousand pounds of their income; now they will be paying 20% on all their income until they reach the upper threshold. This is NOT a tax-cutting budget at all. It is a tricksy budget from a tricksy Chancellor. The media mustn't let him get away with it.

[noisy summer]

I have to say I'm delighted with this cut, it will leave me better off. Lower taxes is always more important than what party is in power.

[N1VIEW]

It was a very very clever Budget! It left Cameron floundering - it was one of his least impressive displays! The Tory leadership has been outflanked. 15% lead is an illusion - the next election is a long way from being won!

[Al Gunn]

The devil is not in the detail. He's in No. 10 Downing Street.

[Andrew Woodman]

Cameron gave a very good reply N1VIEW. It even had Blair smiling.

[Michael McGowan]

Cameron's reply was excellent.

[Martin Wright]

Al Gunn Don't you mean No 11? Or perhaps Nu-Labour have both Lucifer and Beelzebub?

[matthew]

this is not a tax cut. Check the budget report. Overall taxes up £350m.

Lower rate tax up 10%. Basic rate down 2%.

Higher rate allowance and child benefit rising below inflation (despite Brown's headlines) - they announce figures for 3 years ahead, which when inflation is taken into account work out as real cuts.

The sneakiest move of all is the national insurance 'alignment'. Basically in 2007-2008, national insurance is paid on income up to £34,840, but basic rate tax goes up to £39,885. Between £34,840, currently NI is 1%. But under the 'alignment', it goes to the full rate - 11%. So that's an increase in tax of £504.50! £500 less take-home pay.

Compared with the income tax fiddling, which costs £223 in extra lower-rate tax, but saves £647.40 in basic-rate.

So overall, someone on £40k/year will pay £76 MORE tax. That's the bottom line - you get a saving of not more than £424.40 from the basic rate tax cut, but then pay up to £504.50 more in national insurance.

The figures don't lie, and the budget report clearly states the tax burden is up.

[Rachel Joyce]

It was clear all the way through that Brown was only talking about one part of his budget (the bits that sounded like tax cuts and good economics), and that there was clearly another side that would take a few hours for experts to disentangle, and a year or so for the electorate to really be able to see through (when it hits their pockets). However, it left Cameron in a very difficult position and, despite that, Cameron gave an excellent response, picking up on the lack of delivery etc.
Let's just hope the newspapers have worked out the calculations properly for the morning editions headlines:

"Brown's Tax Cut Con", " -claims tax cuts, but actually taxing the poorest workers and middle England more"

[Martin Wright]

Metthew - As soon as Brown sat down I commented on the other thread: "This a typical Brown con trick". Having read subsequent contributions I don't resile from that opinion.

Any one think we might get a snap General Election in 2008?

[mirthios]

Anyone whose income is between £5,225 (the personal allowance) and £18,600 will actually be paying MORE tax.

Simple example: Man (under 65) on occupational pension of £8200 has a taxable income of £8200 - £5225 = £2970.

From April 2007 he will pay 10% on £2230 (£223) and 22% on the remaining £740 (£163) = £386

From April 2008 he will pay 20% on the whole taxable income = £594.

That's £208 MORE - a massive INCREASE of 54%.

The poorer you are, the worse it gets.

Thanks, Gordon!!

[matthew]

People paying more tax:

Anyone earning under £19k or over £39k
Anyone driving a car

The best case is earning £34k, in which case there's a £300 tax cut.

Really badly hurt - small businesses, with the 3% rise in Corporation Tax. A business making £200k will pay an extra £6,000 in tax. Ouch!

[Mike A]

Very smart Budget.

I didn't see much of Cameron's response because the BBC cut away after a few minutes but it seemed a bit glib.

It didn't look like a response so much as just a pre-prepared rant.

Are we really, really going to attack him for the distributional impact of 'flatter, simpler' taxes?!

[Andrew Woodman]

Boulton asking Charles Kennedy about the spirits tax freeze. Very mischievous.

[Mike A]

Rant isn't fair, actually. It was reasonable.

But it didn't look like a 'response'.

[William Heathcote]

If you read the appendices of the budget report you will see clearly the net increase in treasury yield (ie tax rises) of the proposals.

http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/21_03_07_budget_report.pdf

[chrisblore]

Finally Cameron really lays into Brown and gives NuLab a taste of their own medicine! It may have been pre-prepared but it certainly was more interesting that Ming's "response" that followed, whereupon most of the chamber emptied!

[Mike Wood]

Why did the BBC cut away from Cameron's speech and then return in time for Campbell?
Or is that a silly question?

[CrashandBurn]

Wellmy household income is over £80k and we'll be better off by a few hundred quid according to the BBC's calculator. So someone up above has got it wrong. Incidentally if this wasn't a tax cutting budget then neither was Osborne's proposals for a cut in the main rate of corportaion tax - as that would have been funded by a removal of allowances.

What you Tories need to realise is that you are being backed into a corner by a political master. You can argue for *more* tax cuts, sure, but you'll have to say what is funding them, and you are not willing to do that. Furthermore, you will now have to face the choice between Gordon's tax cuts and your own.

Incidentally, arguments based on tax receipts going up as the ecinomy grows meaning we have a tax increase don't impress any economic commentator. Given your party is supposed to be infavour of the same thing - isn't that what *sharing* the proceeds of growth means - you should wise up.

[Graeme Archer]

Crashandburn, I don't understand how you arrive at your figures. If you use the BBC website and only enter gross income of 80K -- ignoring cars, dividends, any other income -- you are 109GBP worse off.

[Graeme Archer]

Unless you're retired? that seems to change things.

[matthew]

it's very possible that the BBC has got it wrong, Crashandburn.

[Lucy]

There is something fishy about the BBC's calcs. I have mailed them for them - shall see...

[matthew]

Is CrashAndBurn a Labour troll? 'You Tories'? "You will now have to face the choice between Gordon's tax cuts and your own."

GORDON HAS NOT CUT TAXES.

Fact.

The tax burden is up by £350m. The low-paid, and people over £39k, are paying more tax, as is anyone with any kind of car other than a Toyota Pious.

[TimC]

Typical of the BBC; show Brown in full and cut from Cameron when he was making an excellent response. Did somebody say they were unbiased?

[Londoner]

Graeme, "crashandburn" could be retired and a huge admirer of the Treasury, with a pension of £80,000 a year. The only person likely to be in that category is a retired senior Treasury civil servant, who may also be gaining through drinking a lot of whiskey.

More likely maybe it was that "household" income bit that is the clue. Perhaps the incomes are split £34K / £46K in which case the £34K person will have gained.

But who would believe a BBC calculator anyway? Cleverly it is all hypothetical because these changes are not until April 2008 and have the tax allowances been announced yet for that year? So any figures quoted can be rubbished by the Govt on the grounds that we can't know what the effect will be.

Despite all this, I have to say that Gordon's speech was more interesting and better delivered than many years. But this is compared with a low base.

[Yet Another Anon]

This is the John Smith budget from 1992.
Not really as John Smith only proposed an increase of the Higher Rate, I couldn't really see John Smith cutting Corporation Tax either and if there was a 10p Starting Rate I imagine he would have been quite eager to keep it.

John Smith favoured rather simpler methods of redistribution than Gordon Brown does, indeed he might even have gone for a Social Credit or Negative Income Tax scheme, doubt he would have been that favourable towards Gordon Brown's Tax Credit schemes.

[David Belchamber]

Mark, some clarification is required.
Am I right in thinking that, from April 2009, anyone on a low income will have to pay 31% in tax/NI immediately that income reaches £5,036 (if that threshold is not raised in the interim)?
If that is correct, I hope The Sun and Mirror are alerted.
I imagine Brown would say that that tax credits will boost it.

[Peter Hatchet]

I've been predicting that Gordon Brown would "try a tax cut" for months. I've predicted it on this blog twice, the last occassion being only 2/3 weeks ago. I always thought it was the cleverest thing Gordon could try.

It is also clear that today is his "green light" for attacking Cameron and ourselves. A plethora of Nu-lab trolls and Labourites have been attacking this blog, Guido's and Iain Dales over the last few hours. It is clear that the fight starts *now*.

However, it isn't a tax-cut. For every cut there's a corresponding increase. Corporation tax cut/small business tax increase. 2p off basic rate, scrapped 10% rate. Rise in 40% band, rise in NI band. I could go on...

What is clear is that Brown is so desperate to gain and retain power he's now shifting the tax burden *from* the middle/high earners who constitute "Middle England" - most of whom lie in key marginals - onto the poor Labour voters who will vote for him anyway.

It is a disgusting cynical and immoral strategy which goes against his own values of social justice, just so he stay Prime Minister.

[Yet Another Anon]

The 2p tax cut in the Basic Rate (although not abolishing the Starting Rate) was Liberal Democrat policy - I imagine he is trying to remove a rabbit the Liberal Democrats hoped to pull from out of the hat and challenge them to back it, there is a question now for the Liberal Democrats whether they will propose a further cut in the Basic Rate of Income Tax or what else they will do - the cut in the Basic Rate obviously was something aimed at them deploying as a policy in the run in to the next General Election.

[CrashandBurn]

No, I have children. I am not retired. I have a care and I like wine (Italian and Spanish reds to be precise).

Nor do I work for the public sector.

[Mark Wadsworth]

David C, yes (if I am the Mark you meant), you start paying tax at 31% once you're over the £5,225 personal allowance (if that is what it is). Increasing tax credits do NOT make up for this. As Londoner says above, both measures just worsen the poverty trap.

[Richard]

I can't believe he's so mad as to increase the bottom rate of income tax rather than just abolish it. That means people on lower incomes will be shafted. And increasing the rate of corporation tax on small businesses?! Does he want to clobber enterprise?

[Mark Wadsworth]

I have updated my cunning PAYE spreadsheet.

For a single employee, the break even point is just over £15,000. If you earn more than that, you will be better off, if you earn less than that you will be worse off. Ignoring tax credits.

[David Belchamber]

Thanks very much, Mark at 17.03. That's just what I wanted (also at 17.16).
Do please let The Sun know the correct workings.

[Josh]

The word spreading round my office is that he is also raising tax on North Sea oil to 50%. Is this a deliberate attempt by El Gordo to shaft Scotland?

Why are the opposition expected to respond immediately after the Chancellor announces his budget? The Chancellor has the luxury of preparing his speech, including the best ways to spin it, in advance. The opposition then have to come up with a response to it off the cuff. If they were given even 15 minutes to consider it, they might be able to do better pointing out the flaws.

[Mark Wadsworth]

Josh, North Sea oil companies have paid an extra 10% on top of 30% corp tax for ages, this was increased to an extra 20% a year or two ago.

[Ted]

Mark - agreed I earn a little less than crashnburn and I'm a little better off as result of this budget. So someone poorer is paying for my lower taxes who could probably do with the extra £18 a month I'm going to get.

[Josh]

OMG!!! Just watched Cammy's speech. Outstanding performance. He even mentioned the marginal tax rates on the poor. That's exactly the thing I've been wanting him to say for over a year.

Who is this guy and what has he done with the eco-toff?

Roll on the next election! Roll on Nulab wipe out in the South!

I can't believe the BBC cut away from it. It's the best thing they've had on for years.

[Al Gunn]

I'm sure that Labour have (recieved donations from) both Lucifer and Beelzebub! Didn't Gordo move into No 10 a few years back? I must have got that wrong then. Either way my point seems to have been clear!

[Al Gunn]

Oh yeah, if the tax cut is from next April, would that mean that it would not neccessarily go ahead should we win an election between now and then?

It would be very interesting if Labour campaigned on the basis that the Tories were not willing to match Labour's tax cuts.

[ricardo]

>>Basic rate of income tax raised by 10%<<

Most people weren't even aware of this rather pointless anomaly. Now we have a more rational system.

Basically, Brown wiped the floor with Cameron who is now remembers as the 'no tax cuts soak holiday flights' candidate.

The Tories dropped themselves in it. If they'd stuck to their traditional policied they wouldn't have been outflanked.

[Richard]

"Most people weren't even aware of this rather pointless anomaly. Now we have a more rational system."

How was a lower rate of tax a pointless anomaly? I'm sure people will become very aware of its removal in a couple of years!