Not playing to the gallery – Brown’s tax plans could cost him dear

On the front cover of this week’s Socialist Worker (available from all good high streets) a summary of who gains and who loses under the new simplified tax system:

LOSER: Call centre worker
Abolition of bottom rate tax band will hit a 24 year old who earns less than £18,000 a year, but must now pay £232 more tax a year

WINNER: Big business
Corporation tax has been reduced again – to just 28 percent – ensuring that Barclays’ £7 billion profits stay with the rich

LOSER: Pensioner
Like more than 1.9 million other people, a pensioner whose income is £6,500 a year pays more than 40p in tax for every extra £1 they earn

On the inside pages, there’s more on New Labour’s abolition of the 10p rate of tax for the low paid:

While some of the poorest workers in Britain are now forced to pay hundreds of pounds more in tax, in the London boardrooms of the world’s richest companies there was joy as corporation tax was slashed.

This is Labour’s third cut to the tax on profits since 1997. Under Margaret Thatcher’s Tory government, corporation tax was 52 percent. This week Brown reduced it from 30 percent to 28 percent – the lowest of the G7 leading industrialised countries.

New Labour’s double standards make a mockery of its claim to be “lifting people out of poverty” and has sent a wave of anger among Labour supporters, even those who think of themselves as loyal to the party.

Millions of Labour voters rightly believe that the tax system should be used to help the poorest by redistributing wealth from the rich to the poor.

They think that those at the bottom end of the income scale should be paying a lower rate of tax, while those at the top should be paying the highest. This week’s changes reveal that Brown’s government is determined to do the opposite.

The abolition of the starting rate will hit young workers without families particularly hard. Those earning less than £18,500 a year stand to lose up to £232 a year – a lot of money when you are scrimping to put food on the table while paying the rent.

But it is not just the young and single who will be out of pocket. Around 1.2 million double income couples with no children and 700,000 double income couples with children will also be paying more. As will 300,000 women aged between 60 and 64.

Brown’s startled response to the political furore over tax has been to claim that his regime of tax credits and child tax credits will make up for the shortfall. But he knows this is a lie.

Lack of information and a cumbersome application process means that only 40 percent of those entitled to tax credits claim them – dropping to just a quarter of single people on low incomes. Those under 25 without children are not even eligible.

Those who do manage to obtain tax credits often find that they become caught in a trap where any extra money they earn can be wiped out by taxes.

The Treasury’s own figures show that 1.9 million people – including about half of all pensioners – whose income exceeds £6,500 a year are allowed to keep just less than 40p of every extra £1 they earn.

When the total of all deductions, including national insurance, are taken into account those people are paying rates of tax on extra earnings of between 60 and 90 percent.

This week’s tax changes will mean a million more people are caught in this trap. The number affected is equivalent to more than the population of Birmingham and Manchester combined.

However Gordon Brown’s world is full of stark contrasts. Multi-millionaire Labour donor Lord Sainsbury showed how New Labour is working for the rich. Last week he transferred most of his 8 percent stake in the Sainsbury’s supermarket to a company he controls, in the process avoiding a £27 million tax bill.

Yet even Brown’s new 28 percent corporation tax is too much for some top firms to bear. The top 50 companies in Britain have an average effective corporation tax of just 22 percent.

Already those at the bottom end of the economic scale are struggling as they pay a bigger proportion of their wages on essentials such as food and fuel, which have shot up in price.

By limiting pay rises for public sector workers to below inflation the government is making the pain far worse, creating a seething political anger.

Last week the Experian credit agency revealed that 5.1 million households are close to not being able to pay all their bills, including mortgages. Three out of four of those are in Labour constituencies. That’s around eight million voters.

And there’s local elections in England on May 1st, with mayoral and Assembly elections taking place in London on the same day…

Thirty years of neoliberalism – the results are poor and depressing

As you read the following, ask yourself – growth in what and for whom?

After 30 years of unprecedented economic growth, the British are richer, healthier – but no happier than in 1973.

The latest Social Trends, the annual survey on the state of the nation from the Office for National Statistics, […] shows that household income has gone up by 60%, and household wealth has more than doubled, in the past twenty years.

The main reason for the rise in wealth has been the increase in house prices.

(Ah, house prices which fell by 2.5% in March…)

But the growing wealth has not led to greater happiness.

In 1973, 86% of people said they were satisfied with their standard of living, while in 2006 85% were satisfied.

The figures follow trends from around the world that show that happiness and satisfaction do not correlate with average income once countries reach “middle-income” levels.

And one in six UK adults reported that they suffered from a variety of mental health problems in the latest survey, of which the largest category was “mild anxiety and depression.”


In 1979, the real disposable income of the top 10% was three times greater than the real income of those in the bottom 10%, but by 2006 that had grown to four times greater.

And social mobility also appears to have declined, according to studies cited in the report.

Children born in 1958 to poor parents coming to adulthood in the 1970s, were more likely to have moved to a higher part of the income distribution than those born in 1970, who came of age in the new millennium.

And child poverty has remained stubbornly high, with 22% of children living in relative poverty in 2005/6, compared to 27% in 1990/91.

For sale: London’s NHS hospitals

Ominous news from The Times:

Ministers have begun a review of London NHS property in a move that could lead to the sale of some or all of the capital’s biggest hospitals to raise billions of pounds for new projects.

The Times has learnt that the London strategic health authority, which includes the 31 primary healthcare trusts in the city, has hired investment bankers to advise it on the options. The NHS has one of the largest property estates in Europe, valued at more than £23 billion.


The most likely London options would include the Government selling off some of the prime hospital real estate in a process known as “sale and leaseback”, which would leave the NHS trust paying rent to the new owners for the continued lease of the building. Another option being considered is “securitisation”, where the Government would bundle together packages of buildings and use them as collateral to raise money in the markets, although that would leave the Government with a huge pile of debt.

But it is not just hospitals that are attractive for potential investors. The Times was told that the NHS was also sitting on vast plots of unused land and outbuildings that could be handed over to developers.

The Times kindly provides a list of Brown’s privatisation crimes:

— Gordon Brown raised £22.5 billion from the sale of the 3G mobile phone spectrum in 2000, but used the proceeds to repay national debt. The cost of the licences weighed heavily on the share prices of the winning bidders, which struggled to cope with the debts they incurred to win

— In July 2001 the Government sold off 51 per cent of National Air Traffic Services, the air traffic control network, but had to pump £65 million into the system after the aviation industry downturn after the September 11 attacks

— In February 2003 33.8 per cent of QinetiQ, the defence company spun out of the Defence Evaluation and Research Agency, was sold to the US private equity firm Carlyle Group for £42 million. Labour came under attack for selling the company during a time of depressed markets when QinetiQ was floated in 2006, valuing Carlyle’s stake at £350 million

— In 2006 British Nuclear Fuels announced that it was to sell its US subsidiary Westinghouse for £3 billion, and in 2007 announced the sale of its UK subsidiary Reactor Sites Management Company

— In May 2007 the Government fast-tracked the sale of a 25 per cent stake in British Energy, raising just over £2 billion. The sale took its holding from 64 per cent to 39 per cent

— In May last year the Government hired advisers to look at raising as much as £1 billion for the Treasury by selling British Waterways, which manages canals and waterways

There is another way