As Alistair Darling prepares to battle his way across a picket line to deliver the Budget, what new information can we expect on tax rises and spending cuts?
The huge cuts to public spending (£38bn) needed to halve the deficit by 2013-2014 won’t be unveiled until after the election, and ministers insist that previously announced tax rises will raise £19bn in new revenue.
But last week Peter Mandelson broke ranks to admit that further tax rises may in fact be necessary, and we’re likely to learn of some of them today.
It looks like Darling has resisted pressure from cabinet colleagues, including Ed Balls, to reduce the threshold for the new 50p tax rate from £150,000 to £100,000, but new tax rises on the rich can’t be ruled out.
It also looks like our old friend “fiscal drag” — not adjusting tax thresholds for inflation — will be making an appearance.
If adjusted for inflation, the personal allowance should rise to £6,669, but freezing it at £6,475 will bring in an extra £1bn for the Treasury and mean an extra £40 in tax for every taxpayer.
Darling is also expected to freeze the threshold for the 40p rate at £43,875, rather than raise it in line with inflation to £44,995, netting the Treasury an extra £450m.
Elsewhere, the FT reports that the banks will face “new taxes” and that Darling will confirm the government’s support for a global bank levy.
Labour’s deficit reduction plan, based on a ratio of 67 per cent spending cuts to 33 per cent tax rises, is currently the most progressive (the Tories favour an 80:20 split and the Lib Dems — remarkably — support a 100:0 ratio) and it’ll be worth watching to see if the tax element of that rises today.
Meanwhile, I wonder how full the Labour benches will be this afternoon. A number of MPs from the left of the party are planning to miss the Budget rather than cross the PCS picket lines.
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