Stalin, Mrs Rochester and Macavity - the mystery cat

Ahead of his Budget speech Gordon Brown was 'outed' as acting with 'Stalinist ruthlessness' (it wasn't a compliment) by Lord Turnbull, former head of the Civil Service. The Chancellor was also, again, likened to Macavity, TS Eliot's 'mystery cat'. Whenever difficult or contentious issues have confronted the government in past years, Gordon Brown has mysteriously not been 'there'.

In fact, Gordon Brown is neither Stalin nor 'the Hidden Paw' of legend. According to some in the Blairite camp, he's actually Mrs Rochester, raving in the attic, planning to torch the New Labour 'project'.

Whatever you feel about the Chancellor's character there's no doubt it will become more of an issue as he inches closer to the top job in politics in this country. The unflattering headlines about his style will have ruffled the feathers of a man who is in Westminster notoriously sensitive to criticism.

No pressure, Gordon...

It was an unusual way to start Budget Day, underlining the significance of this eleventh and last Budget from Gordon Brown. The pressure was piled on by Tuesday's other news that inflation rose again. The retail price index (the measure the government prefers now not to talk about) showed inflation at its highest since 1991.

Add in an opinion poll suggesting that David Cameron would have a 15-point lead over Gordon Brown with the latter as Prime Minister and Gordon was under the gun to perform.

Ten years ago, in the year to April 1997, £69 billion was raised in income tax. This year the take will be more than double that. The stamp duty tax take is 417% up on what it was before Gordon took office.

Inheritance tax raised less than £1.56 billion in 1997; now it raises £3.56 billion. The number of estates affected has doubled to 6% and, according to Grant Thornton, by 2022, 15% of estates will pay inheritance tax.

The number of higher-rate taxpayers has jumped from two million to 3.5 million as tax thresholds have not kept pace with increases in earnings.

Next Year's Budget?

The Chancellor teased us by reminding the Commons that the last Chancellor to deliver as many budgets as he had was Gladstone - who had actually combined the offices of PM and Chancellor. Something Gordon said no-one should ever attempt again.

As usual, he sprayed statistics around but Budget 2007, which will no doubt garner favourable headlines, was curiously empty of immediate substance for individual taxpayers.

The killer finale of Gordon Brown's speech, a proposal to cut the basic rate of tax by 2p to 20p in the £ sounded good. But it isn't happening until April 2008. At the same time, the abolition of the lower rate of 10% (which Gordon himself set in 1999) is a classic example of the Chancellor giving with one hand and then clawing back with the other.

The tax cut won't be revenue neutral but it's costing him far less than you might expect. The 2p cut will cost around £9 billion but the abolition of the 10% rate brings in around £8 billion - so you'll not be that much better off.

A 20% increase in the amount you may invest in a cash ISA to £3,600 is welcome news surely. Well, when it happens; again in 2008. In fact the overall individual savings account limit is to be increased by a miserly £200 to £7200.

What this means is that once the new ISA regime is in place in April 2008, we will have the curious situation that if you invest the maximum in a cash ISA, you actually be able to invest less in stocks and shares under the ISA umbrella than you can now by using two mini ISAs. Gee thanks, Uncle Gord!

Whisky drinkers who are trying to give up smoking did well out of the Budget. Yet again the duty on spirits was frozen while the VAT charged on over-the-counter anti-smoking aids like nicotine patches is coming down to 5%.

Inheritance tax will remain a bone of contention. A further planned increase in the nil rate band to £350,000 in 2010 was announced. Gordon claimed that this would mean 94% of estates would not be liable for IHT. That's a rather optimistic estimate to say the least and one that nobody else appears to agree with.

Stamp duty was also left broadly untouched with the notable exception of the introduction of an exception for new build zero carbon homes (if you can find one) costing less than £500,000.

Continuing the 'next year's budget' theme, the Chancellor unveiled a tax cut in the main rate of corporation tax to 28%, which will take effect in April 2008. On the other taxes are going up for smaller companies, with the rate here rising to 20% this year and in stages to 22% by 2009.

Changes to capital allowances should, however, see smaller companies and sole traders thronging the likes of PC World - the Chancellor introduced a 100% annual investment allowance of up to £50,000. Guess when this takes effect? Correct, April 2008.

The Chancellor also nailed his successor's colours to the mast on tax allowances and grants for pensioners. The tax-free allowance for pensioners under 75 will rise in three stages from £7,280 to £9,770 in 2011. For over-75s, the tax free allowance will rise annually from £7,420 to by £10,000 by 2011. And there will be grants of between £300 and £4,000 for pensioners installing insulation and central heating in their homes.

Despite a raft of small environmental measures, Brown's only meaty environmental announcement regarded landfill tax which will rise by £8 each year (from 2008, of course). A further battering of gas-guzzlers with road tax at the top end rising to £400 is a better headline than a revenue generating scheme - it remains to be seen whether this alone will move drivers away from the 4x4 and into less polluting cars or even public transport

There was good-ish news for members of failed corporate pension schemes. All the 125,000 people who lost their pensions because of company insolvency will get some help with the financial assistance scheme increased from £2 billion to £8 billion. Not that the government is ever likely to admit its responsibility for misleading people over the safety of company pensions.

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