Friday

How much better off would we be if Gordon Brown had never existed?

The Institute of Fiscal Studies has now established that average incomes fell in 2003/04 because Gordon Brown took so much more of our money in income tax and national insurance. We obtained higher salaries, but Gordon Brown more than wiped out the benefit.
Gordon Brown did not only increase our taxes in that one year of 2003/04. He has increased our taxes in most of the years he has been in office. They have been slipped in so that they don’t get noticed on budget day.
Where would we be if Gordon Brown had never existed? Let us just imagine for a moment that Labour did not come to power in 1997 or, at least, that Labour kept to what Tony Blair told the Financial Times that year: “we have no plans to increase taxes”. How much better off would we, as individuals, be if Gordon Brown had kept to that?


It is true that early on he halved the starting rate of income tax and reduced the basic rate by one per cent. But this has been cancelled out by the fact that he makes us pay income tax on a bigger a proportion of the money we earn. At present, most of us pay tax on every pound above £4,745. It is called the ‘tax threshold’. If this had been increased in line with earnings since Mr Brown’s first year as Chancellor, it would now be considerably higher, at about £5,384. So we pay tax on £640 of our earnings that we would not have done, if Gordon Brown had never existed.
The most fortunate, high-earning ones among us now pay tax at the top rate of 40 per cent on every pound above £36,146. They include people like senior policemen, doctors and head teachers. Where would they be if Gordon Brown had never existed? They would not be paying the top rate of tax at all unless they earn over £40,120. Someone earning that sum or more, pays top rate tax on an extra £3,974 because of Gordon Brown’s eight years.
National insurance is now levied at 11 per cent whereas it would only be 10 per cent, if Gordon Brown had not increased it. And there would be no special one per cent national insurance levied on those who earn above the upper limit. Someone on the average income of £21,900 pays an extra £136.
Mr Brown has also increased the taxes we pay when we spend our money. The duty on a packet of cigarettes has soared under his rule. If it had risen in line with earnings, it would be £3.00. But as result of his increases, it has risen to a whopping £3.85. Someone who smokes 10 a day, pays an extra £155 a year in duty than would be the case without Gordon Brown.
If we decide to move house, he gets us again. If stamp duty had been increased in line with house prices, it would only be payable on houses and flats worth over £143,000. For seven long years, Mr Brown kept the threshold down at £60,000 and only, now, just before the election, has he increased the threshold to £120,000. That still means that someone buying a modest new home for, say, £140,000 pays £1,400 more than would have been the case if Mr Brown had not been in charge. Someone buying something bigger faces a much heftier bill because of the new, higher rates. Someone paying £260,000 for a place to live, pays £7,800, whereas he or she would have paid only £2,600, if Mr Brown had not had his way.
And so the list goes on. It would be a big exercise to take in all the increases including easy-to-overlook measures such as the increase in duty on insurance policies. One of the biggest levies has been the £5 billion a year tax on pension funds. That was a clever – or rather a cynical – move. We don’t much notice it during our working lives. It will only be when we retire that we might, perhaps, recall that it was because of Gordon Brown we can’t afford to be a member of a golf club or go to the theatre as before.
Even when we die, our inheritors will be worse off . The inheritance tax threshold now is £263,000. But if it had been increased in line with house prices, it would be vastly higher at £512,000. That means tax of nearly £100,000 payable on an estate of that higher amount, because of Mr Brown’s presence.
Mr Brown could argue that it has all been in a good cause. It has been spent to bring state education and the NHS up to new high standards. There may indeed have been some modest improvement in the NHS although it is probably still the least effective medical system in the advanced world. Independent analysis of reading ability suggests that there has been precious little improvement in education.
Independent analysts reckon that there is more tax to come, too. The Institute for Fiscal Studies says an extra £11 billion will have to be raised after the next election – equivalent to 3.5p on income tax.
On Mr Brown’s side, you can say that he has given money back in the form of tax credits. But the tax credits only go to those people he had chosen to select. Generally they do not go to people without children below pensionable age. They also have to be applied for and many people – often the poorest and most vulnerable – fail to go through the form-filling required.
More than half of pensioners are now entitled to means-tested benefits. He has gradually been turning us into a nation of supplicants, applying to him to get back a little of the money we have previously paid. He is creating dependancy Britain which, he hopes, will vote for his party to keep the payments flowing.
We would not just be richer, we would have more dignity and independence, if Gordon Brown had never existed.
An edited version of the above appeared in the Daily Express today. One major area of tax increases I failed to mention was council tax, which, according to estimates by the Conservatives, has risen on average by over 70 per cent since Labour came to power.
I was greatly helped in my research for the article by Corin Taylor of Reform. On a quick reading, it might not be obvious what calculations are necessary to bring out the figures that we did. Corin found out what the rates of tax were in 1997/98 and then the increase in average earnings between then and 2003/04. I then made a bold assumption about what the increase has been from then until 2004/05. We were thus able to work out what the thresholds and the tax would have been “if Gordon Brown had never existed”.
One thing became clear during this exercise. That someone on average earnings is not in a very diferent position than he or she would have been without Gordon Brown. The money he has raised since 1997 has come from elsewhere – from the pension raid, from stamp duty, council tax and so on. Since so much of the tax is indirect tax, it might be a useful to look further at how his taxes have affected the poor. I am not sure that the Institute for Fiscal Studies has looked at this. It normally concentrates on taxes on income. It is worthy of further research and if anyone knows of work that has been done on this, I would be glad to hear of it.
The Reform website is here. It is well worth signing up to be emailed the excellent daily media review.

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