Brown gives surprise tax cuts

Britain's leader-in-waiting Gordon Brown fired a budget broadside at a resurgent opposition on Wednesday by making a surprise cut in income and corporate taxes months before he expects to take over as prime minister.
With his ruling Labour party trailing in the polls, the long-serving finance minister used his 11th budget to offer more money for families, pensioners, schools and company bosses from April 2008, right in time for an election expected in 2009.
Brown also talked up his record of securing unbroken growth and low inflation during a decade in office, and predicted the economy would grow by as much as 3 percent in 2008 and 2009. Blair has said he will quit before September and no credible challenger has yet emerged to rival Brown for the leadership.
The FTSE-100 share index rose on news of the 2 percentage point cut in the main corporate tax rate but government bonds fell as markets took on board that Brown would have to borrow 8 billion pounds more over the next three years to pay for it all.
But Brown said his budget was affordable. Education spending would rise strongly in the next three years but overall government expenditure will increase by around 2 percent a year, its slowest rate in a decade. This budget, Brown told parliament to loud cheers from Labour lawmakers was for "Britain's families, for fairness, and for the future."
"To reward work, to ensure working families are better off, and to make the tax system fairer, I will from next April cut the basic rate of income tax from 22 pence (in the pound) down to 20 pence. The lowest basic rate for 75 years."
To help fight climate change, the 56-year old Scot also unveiled higher taxes on gas-guzzling cars, increased duty on petrol and proposed tax breaks for home energy-saving products. But he shied away from raising levies further on airline travel.
The opposition Conservatives had proposed a corporation tax cut but Brown's move stole their thunder. The income tax cuts should make the average family 200 pounds richer by 2009, according to Treasury figures. Business groups welcomed the corporate tax cut but said Brown was giving with one hand and taking with another. "These changes will not initially reduce the overall burdern of business taxes, and there will be losers as well as winners," said Richard Lambert, director general of the Confederation of British Industry. "Some big companies that for one reason or another don't pay much tax will lose out."
Similarly, some higher earners may also be hit by changes to the tax system to bring National Insurance, a separate payroll tax, more in line with the standard income tax.