Britain, like America, faces a financial crunch.
01/02/2007

Day by day and little by little the day of financial reckoning gets near. Christina Speight ============================ TELEGRAPH 31/1/07 Brown's legacy: an extra 3p on tax By George Jones, Political Editor Gordon Brown will leave his successor at the Treasury a double whammy of £10 billion in tax rises and £10 billion in public spending cuts, a report from an influential economic think tank says today. Since Mr Brown became Chancellor 10 years ago the total rise in tax revenue has been £40 billion or £1,300 per family, the independent Institute for Fiscal Studies found. If, as now seems certain, Mr Brown succeeds Tony Blair this summer, his first years as prime minister will see not only the "tightest squeeze on spending" for a decade but also increases in taxes totalling £10 billion. The Institute's Green Budget for 2007 claims that Mr Brown's record at the Treasury over the past decade was not as glowing as the Chancellor likes to make out. While the public finances are stronger than those he inherited from the Conservatives in 1997, he had presided over a smaller improvement than in most other industrial countries, the IFS says. After a decade of Mr Brown's stewardship, Britain still has a relatively big structural deficit by international standards. Over the period in which Mr Brown hopes to fight his first general election as prime minister, he is aiming to cut his borrowing by a further £20 billion over five years to stay on course to meet his self-imposed fiscal rules. "To that end, he is projecting a further £10 billion increase in the tax burden and has pencilled in a £10 billion cut in public spending," the report says. The Green Budget, prepared in collaboration with bankers at Morgan Stanley, is also critical of Mr Brown's decision to change the dates of the economic cycle over which his fiscal rules are judged. Morgan Stanley dates the present cycle from 2003/04 to 2009/10, rather than the Chancellor's favoured 1997/98 to 2006/07 period. Over the "green" period, Mr Brown would break his "golden rule" of balancing the books over the cycle by £66 billion, while his preferred dates allow him to meet it with £7 billion to spare, says the report. The IFS says he has "pencilled in" £7 billion worth of spending cuts for the three years covered by this year's Comprehensive Spending Review, with more expected. "If the Chancellor confirms these plans in the Budget, this will be Labour's toughest spending review yet. "If delivered, it would be the tightest squeeze on spending since it stuck to the plans it inherited from the Conservatives in its early years in office, when it was helped by falling unemployment and debt interest costs." At 2006/07 prices, Mr Brown is spending £22 billion more than Kenneth Clarke did in the last Conservative administration, but raising £31 billion more in tax, leading to him borrowing £9 billion less and bringing public sector net debt £80 billion lower than under the Tories. But, of the 22 members of the Organisation of Economic Co-operation and Development, 17 have improved their structural budget balances and 15 reduced their debt by more than Britain since 1996. The Treasury yesterday encouraged Government departments to raise more money by selling off under-utilised or surplus assets as it attempts to make £30 billion of asset disposals by 2011.

 
 
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