Fiscal and Monetary Policy - The 1998 Budget

Some Economics from MysteriousGirl

Well, it is now four days since the Budget came out, on Tuesday the 17th of March. We have all had time to think over the changes which the Chancellor of the Exchequer, Gordon Brown, has made. Many predictions have been fulfilled, but there were a few surprises. In brief:

Excise Duties

The tax on a packet of twenty cigarettes has increased from Ł2 to Ł2.21p.
The tax on a pint of beer has increased by 1p.
The tax on wines and spirits has stayed the same.
The tax on unleaded petrol has increased by 11p per litre.

Income Tax

The top and middle rates of income tax have remained unchanged.
The intention of reducing the base rate of income tax to 10% from 20% has been stated, but will not actually be implemented until after the introduction of the Welfare to Work scheme.

Road Tax

The road tax on small cars and low-emission engines has been reduced, from Ł150 to Ł100, with other reductions on a sliding scale according to engine cleanliness.
The road tax on medium and large size cars has remained the same.
The road tax on lorries with clean engines will also decrease within a year.

Inheritance and Capital Gains Taxes

Inheritance tax has remained at the same level, but the cut-off level, above which the tax is imposed, has been raised to Ł217,000, from Ł215,000.
Much the same treatment has been given to CGT, which some people had thought the Chancellor would abolish. The level has now been raised from Ł2500 to Ł2700.

Value Added Tax

All levels of VAT have remained the same - 17.5%.
Despite predictions to the contrary, no VAT charges have been introduced on items such as newspapers and magazines.
Despite intensive lobbying, VAT is still imposed on women's sanitary items.

Negative Taxes etc.

A tax allowance is now to be made for working families, in an effort to break the unemployment trap (i.e earning more from benefits than from work).
The government will now pay benefits to all working persons earning less than Ł90 a week, on a sliding scale.

Did You Know??
The Budget speech this year was one of the shortest ever, clocking in at a mere 1 hour, 3 minutes. Last year, Mr. Brown's first Budget speech ran for 2 hours, 20 minutes. Even this was shorter than usual, an average Budget speech being 3 and a half hours. Also, the usual lively debate on how many sips of whisky the Chancellor will take during his speech has been settled well and truly by Gordon Brown, who took none - being a teetotaller, he chose to sip water instead of the traditional tipple.

ANALYSIS The Finance Bill this year has been considerably less radical than had been suspected. As such, the implications are less far-reaching than might have been expected. The government plan to introduce the Welfare To Work scheme requires funding of Ł3 billion, to be raised almost exclusively from the revenue of the controversial new Windfall Tax. In their pre-election manifesto, the Labour Party promised not to raise taxes - a necessary oath considering the 85% income tax imposed when Labour was last in power in the 1960's.
The Labour Party is placing heavy emphasis on the importance of the environment, the main tax rises being on goods with severe negative externalities, such as cigarettes, alcohol, and petrol. The lowering of the road tax on low-emission cars and lorries also reflects this. Bound strictly by their promise to keep to the Tory spending plan for at least three years, Labour find themselves unable to raise direct taxes, such as income tax, and forced to cut spending in all departments. To the disgust of the cabinet, Mr. Brown has announced that he plans to follow these ultra-tight spending plans for the entire first term of office, rather than just three years. The only department not to have had it's finance cut this year is the Ministry of Defence, sue to the potentially explosive situation in the Gulf.

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These are some of my other economics pages which you may be interested in:

The Windfall Tax
The Welfare To Work Scheme
The National Minimum Wage

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Fiscal and Monetary Policy - The 1998 Budget

Some Economics from MysteriousGirl

Excise Duties The tax on a packet of twenty cigarettes has increased from Ł2 to Ł2.21p. The tax on a pint of beer has increased by 1p. The tax on wines and spirits has stayed the same. The tax on unleaded petrol has increased by 11p per litre.

Income Tax The top and middle rates of income tax have remained unchanged. The intention of reducing the base rate of income tax to 10% from 20% has been stated, but will not actually be implemented until after the introduction of the Welfare to Work scheme.

Value Added Tax All levels of VAT have remained the same - 17.5%. Despite predictions to the contrary, no VAT charges have been introduced on items such as newspapers and magazines. Despite intensive lobbying, VAT is still imposed on women's sanitary items.

Excise Duties

The tax on a packet of twenty cigarettes has increased from Ł2 to Ł2.21p.
The tax on a pint of beer has increased by 1p.
The tax on wines and spirits has stayed the same.
The tax on unleaded petrol has increased by 11p per litre.

Income Tax

The top and middle rates of income tax have remained unchanged.
The intention of reducing the base rate of income tax to 10% from 20% has been stated, but will not actually be implemented until after the introduction of the Welfare to Work scheme.

Value Added Tax

All levels of VAT have remained the same - 17.5%.
Despite predictions to the contrary, no VAT charges have been introduced on items such as newspapers and magazines.
Despite intensive lobbying, VAT is still imposed on women's sanitary items.