Gordon unveils tax rises for all

GORDON BROWN today clobbered 23 million wage earners with a punishing set of tax rises. In return, he offered one glittering but distant prize, a reformed and cash-rich Health Service.

The Chancellor announced a 1% rise in national insurance contributions for all employees, taking the level up one point to 11%.

But he also delivered a classic stealth tax with massive consequences for higher earners. While the new 11% rate will cover earnings of up to around £30,000 a year - the current ceiling - the extra 1% will apply all the way up the income scale. This will cost someone on £50,000 a year an extra £9.62 a week. The national insurance increase will also hit employers in a change that looks certain to filter through into higher prices.

And, in a move which came perilously close to breaking Labour's pre-election pledges not to raise income tax, he froze the personal allowance, the guaranteed free income for every taxpayer, at its current level of £4,615, scrapping the normal up-rating in line with the rise in the cost of living.

Even on the Chancellor's own favourable examples, delivered in his Budget speech, the cost will be substantial. A full time earner on £21,400 a year will pay almost £200 a year more in tax. For a wage earner on £32,100, just below the point at which higher rate tax begins to bite, the extra cost will be £300 a year.

Mr Brown sweetened the pill with help for families on earnings as much as £66,000 a year - a gesture designed to mollify middle England.

As usual, in his sixth Budget, he came up with a variety of minor but headline-making give-aways, including a World Cup bonus of 14p off the price of a pint of locally brewed beer to come into effect by this summer. But when the give-aways had been balanced against the extra charges, the net cost of today's raid on the taxpayer amounts to a hefty £7.6 billion, with the threat of yet more to come.

The increase in National Insurance means that people earning £10,700 a year will pay £1.65 extra a week, those on £21,410 will pay £3.70 a week, and those on £32,100 will pay £5.75 per week. But there were some crumbs of comfort for drivers and for businesses, large and small. He also abolished the tax on bingo.

There were early signs that the Chancellor was deploying his customary smoke and mirrors to conceal the worst of the bad news. While he was quick to come up with the tax impact on relatively low wage earners, Treasury sources were mysteriously unable to give the cost of the tax hit to higher earners claiming 'we haven't worked out the figures'.

It was suggested, however, that the Chancellor's no limit one point rise looked like a straight 1p on the higher rate of income tax, barely disguised as a national insurance charge.

But the Chancellor gave no hint in his Budget speech that he had introduced what was virtually a new supertax, leaving the details buried in the mass of Budget figures.

Mr Brown began his Budget speech at 3.31pm and it lasted just 58 minutes. It was warmly received by Labour MPs delighted at the extra cash for the hard-pressed NHS.

The Chancellor declared that it was his 'duty' to find the billions of extra cash required to fund a modern and efficient National Health Service.

With the Tories clamouring their protest that tax was the wrong route, Mr Brown left no doubt that he was taking a deliberate gamble on which the Government's fate at the next general election some four years from now could well depend.

There was agreement across the parties, he said, that the Health Service needed huge amounts of extra investment. 'The question is not whether we have to pay more but how we pay more.'

Clearly worried as to whether the voters will see the results of the tax pain in time for the next election, Mr Brown made a central plank of his Budget a pledge that the NHS will, for the first time, be subject to independent audit and inspection - with an independent complaints watchdog for patients with grievances.

And he promised the results would be on display in regular local reviews of the performance of hospitals and other healthcare in every area of the country.

The National Insurance rise coupled with the freeze on the tax threshold will raise a massive £9.2 billion next year alone. At the same time as he swooped to secure billions more to fund the health service, the Chancellor offered a generous hand-out to many families.

He began his Budget with an announcement that his new Child Tax Credit will go to parents on incomes of up to £58,000 a year.

Mr Brown promised £4billion of extra spending on key public services next year. But he put himself on a collision course with the public sector unions with a blunt warning that extra cash must be matched by modernisation and pay restraint.

Modest new measures to help industry and business have already been announced. Tax relief was also made to a range of good causes, including amateur sports clubs.

The Chancellor announced the abolition of the climate change levy on electricity generated through so-called green methods.

Ex-banker examines the NHS books

Click here for the full text of the Chancellor's Budget speech