Families 'must pay an extra £2,600 a year tax'
Families will be paying £2,600 more tax every year under Labour plans contained in the pre-budget report, a leading economic think tank says.
Alistair Darling's proposals had been billed as offering tax cuts to millions with an eye-catching announcement that the inheritance tax threshold would be doubled for couples.
But those claims began to unravel after analysis by the Institute of Fiscal Studies showed that by 2012 millions of households will be facing an annual tax bill of more than £20,000, an increase of around £50 a week.
The revelation has echoes of Gordon Brown's final budget as Chancellor last March when his pledge to cut income tax masked a series of proposals that saw many middle class families facing higher bills.
The Conservatives said the IFS analysis showed Mr Darling's budget was "unravelling".
George Osborne, the shadow chancellor, said: "The Chancellor said the budget represented a tax cut. But independent experts now find that there is a £50 a week tax bombshell for families. This shows just how cynical and calculating Gordon Brown's government has become."
In addition it emerged that under Mr Darling's report:
- Householders face an increase in council tax of £360 a year
- The Treasury will grab £2bn from top-up state pensions
- A million families face paying hundreds of pounds in legal fees to rewrite their wills following changes to inheritance tax.
The revelations came as Mr Brown endured a torrid afternoon in the Commons at the hands of David Cameron, who taunted him for being a "phoney".
And it follows a terrible week for the Prime Minister following intense criticism for his decision not to hold an early election and a fall in popularity in the opinion polls.
Health Secretary Alan Johnson acknowledged that "it's not been the best of weeks" for Mr Brown.
"I'm not saying we are blameless...If he [Mr Brown] had thought it through and decided a weekend earlier, we wouldn't be having all of this," he said.
The full extent of Mr Brown's tax grab was revealed following calculations made by the IFS using official figures buried in the small print of Alistair Darling's budget report.
The government will raise the extra money by taking a growing slice of the increase in people's wealth and by hiking capital-gains tax, council tax and airline duty.
As well as the extra tax grab, families are facing a significant squeeze on their finances from five interest rate increases since last summer.
The IFS report coincided with an authoritative survey showing the housing market slowdown is deepening, with prospective homebuyers abandoning the market at the fastest rate in over four years.
House prices have fallen for the second month running and the market is showing worrying signs of a downturn, according to the Royal Institution of Chartered Surveyors. It said the number of new buyers was falling at the fastest rate since early 2003.
Mr Darling came under fire for copying a number of Conservative initiatives in his pre-budget report. He announced a more generous inheritance-tax system and a crackdown on private equity chiefs and wealthy foreigners.
However, it also emerged that Mr Darling is planning to raise hundreds of millions through changes to capital-gains tax that hit small businessmen and entrepreneurs.
An estimated £2bn will also be raised over five years through changes to the second state pension which will hit those earning more than £35,000 a year. Extra taxes have also been levied on airlines and company car drivers.
In total, the government will raise an extra £1.4bn annually by 2010 purely as a result of tax rises announced on Tuesday.
According to the IFS, the average family is already paying £17,400 in tax annually including income tax, council tax and VAT – an increase of £5,400 in real terms since Labour were elected in 1997.
The total tax paid now by country's 31.6m families is £550bn. According to the Treasury figures that bill will have increased to £724bn in five years, increasing the average family tax bill by £2,600.
The figures are calculated by using official government predictions on economic growth along with projections on money raised from personal taxes and increases in disposable income.
Much of the extra tax is raised by "fiscal drag" as the government increases tax allowances in line with inflation rather than wages or house prices. Therefore, as people earn more or become wealthier they surrender more of their money in tax.
Mr Cameron said that the government's refusal to allow a referendum on the issue – despite promising one in their 2005 election manifesto – would further damage the Prime Minister's credibility.
The IFS also launched a damning attack on the government's economic record and the latest pre-budget report. They accused Mr Brown and Mr Darling of increasing borrowing, squeezing spending and hiking taxes.
"The defining feature of Alistair Darling's first big set piece statement as Chancellor has been his need for extra borrowing: borrowing money and borrowing policies," said Robert Chote, the director of the IFS.
According to the IFS, the Treasury has consistently got its forecasts on borrowing and other key measures wrong. It now has a £6.5bn "black hole" in its budget that it hopes to reduce with tax increases and cuts in state pension spending by 2010.
Labour was also accused of effectively cutting spending by £6bn over the next three years despite attacking the Tories for such plans in the last election campaign.
The IFS said that overseas aid, health, transport, education and science were the relative winners from yesterday's comprehensive spending review. The home office, foreign office, the department of work and pensions and local government were the main losers.
Meanwhile in the Commons Mr Brown was reeling from a devastating performance from Mr Cameron who started by simply asking: "Can we believe what the Prime Minister says?"
The Tory leader used the first Prime Minister's Questions since the summer to brand Mr Brown a "phoney", going on to claim there is now "a credibility gulf" at the heart of the Labour administration. And he repeated his accusation that the Prime Minister was taking the British people "for fools".
Mr Cameron is still flushed from the success of seeing off the prospect of an election and Labour's shameless adoption of Tory tax plans in this week's pre budget report. But yesterday it emerged that the tax bill facing many families is set to increase.
Mr Brown said he would not take lessons from a leader who had changed his mind about grammar schools, museum fees and green taxes.
But Mr Cameron continued to land heavy blows across the despatch box. He even stole his best line from a letter in yesterday's Daily Telegraph when he told Mr Brown: "You are the first prime minister in history to flunk an election because you thought you could win it."
To loud cheers from his own MPs, Mr Cameron added: "Does he realise what a phoney he now looks? Have you found a single person who believes your excuses for cancelling the election?"
Source: telegraph.co.uk
Please post any news stories about IVAs here:
http://www.iva.co.uk/forum/default.asp?CAT_ID=5
See my Blog:
http://ivanews.blogs.iva.co.uk
