Budget 2007 - Bytestart's Point of View

When Gordon Brown delivered his 11th consecutive Budget speech yesterday, most commentators expected a few nods to the environmental lobby, lower taxes for companies (so the UK doesn't lose competitiveness), and the usual claims of prudence and stability.

The Chancellor managed to save his headline grabbing measure until the end - a 2p reduction in the basic rate of Income Tax. Of course, this cut was almost completely negated by his plans to remove the 10p starting rate - surely the most cynical gesture of the entire speech.

Lower taxes were indeed promised for larger companies (a 2p reduction in the Corporation Tax rate from 30p to 28p). But, once again, this nod to big business was counterbalanced by a 3-step rise in Small Companies Tax Rate from 19p to 22p over the next three years. This means that millions of small businesses will be thousands of pounds worse off as a result of this change.

Carol Undy, from the Federation of Small Businesses, said:

"Small businesses employ fifty eight per cent of the private sector workforce - over twelve million people – and the increase in their tax rate fails to acknowledge their contribution. A cut in income tax is welcome but does not fully offset the dismay felt by small firms despite the other allowances that he has offered"

As we reported a few weeks ago; despite the Chancellor's record of stability and growth, he has performed badly against almost all other developed nations over the past decade. Much of the "growth" Brown talks about is accounted for by the boom in public sector employment and spending.

With personal debt now larger than the UK's annual GDP, and inflation and interest rates on the way up once again, his successor may not be blessed with as rosy an economy as Brown himself inherited in 1997.

James Leckie, Editor