The Budget 2007 - The Good, Bad and Green

By MoneyhighStreet Staff. Published on March 21, 2007 This post currently has no comments.

Ford Focus

The budget has come and gone and now we know the good and bad news.

Mostly it seems to be bad news, particularly if you are a low income family. Yes, Gordon Brown is reducing the basic rate of income tax from 22p to 20p, which at first sounds surprising for a Labour Chancellor to announce, however read further and you see that the 10p minimum tax rate has been abolished.

Guess what? These two changes, when combined, mean that the tax burden for low income families will remain the same, or may even slightly increase.

Given Labours stated desire to get people off benefits, this tactic seems strange, as soon as they earn above the tax threshold (about £18,000 pa) they will be hit with a 20 percent tax rate. This cannot be an incentive to find employment rather than relying on benefits.

Smokers and beer drinkers will not like the 11p tax hike on a pack of cigarettes and 1p per pint increase in beer duties, however it is car owners who bear the brunt of tax increases, particularly if you drive a so called “gas guzzler” which doesn't just mean 4×4's, but also the larger people carriers, some sports cars and some executive cars and estates.

Those with smaller, less polluting cars will welcome the further reductions in car tax, though why are there not tax incentives for owners of large cars who want to convert to LPG and other greener fuels?

There are, or more accurately will be, some handouts such as increases in child allowance, small increases in the capital gains tax threshold and benficial changes to pensioners tax positions, however note the timing - April is the earliest and some of these handouts don't fully apply until 2010. You've guessed it, the increases in cigarettes and beer apply from this Sunday!

There is mixed news for businesses. Whilst larger corporations will welcome the reduction by 2% in corporation tax, smaller businesses will be puzzled and alarmed by the increase in tax for them. Small business provides a power house for the economy so why provide a disincentive to those looking to run their own firms?

Green, green and more green - or is it? Sure there will be stamp duty benefits in zero carbon houses, which is good, but these are unlikely to be built in the next few years in any number. Surprisingly VAT was not put onto airline tickets, which would have helped to reduce the demand for air travel. Maybe Gordon Brown thinks he has done his bit with clobbering the car drivers.

So all in all a budget with few surprises, but also few real benefits to anyone other than the government tax coffers. Gordon Brown gives with one hand (in a few years time) and then takes with the other (now) and has missed an opportunity to make the UK greener.

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