Tax warning as Gordon Brown plans fresh cuts

Dec 8 2009 by William Green, The Journal

NORTH East families face a tax bombshell and public spending cuts as Chancellor Alistair Darling battles to balance Britain’s books.

John Shipley, leader of Newcastle City Council, has warned council tax rises will be difficult to avoid if ministers squeeze local government funding.

He is also concerned about raids on key Whitehall budgets with Prime Minister Gordon Brown pledging to slash the £175bn public deficit.

Mr Brown vowed to curb a “culture of excess” in senior public sector pay and bonuses as he detailed plans to cut another £3bn from the cost of running Government.

He said many salaries above £150,000 and £50,000-plus bonuses would require ministerial approval as part of an efficiency drive – with a review including local council chiefs.

Top earners would be publicly identified and bodies wasting public cash “named and shamed”, he said.

Health Secretary Andy Burnham yesterday confirmed the Government hopes to save £600m by cutting its multi-billion pound NHS electronic patient record system.

Mr Darling may use tomorrow’s Pre-Budget Report to announce the threshold at which the basic and higher rates of income tax will be frozen. Measures could also be announced on inheritance tax. An additional 70,000 people could become higher-rate taxpayers if the 40% threshold remains at £43,875 from April next year.

Mr Darling has declared the better off will have to pay more towards the cost of the recovery – with the prospect of a windfall tax on bankers’ bonuses.

The Chancellor may also confirm VAT is returning from 15% to 17.5% – making goods in the shops more expensive.

Liberal Democrat Coun Shipley said: “Government is already going to raid some budgets across all of Whitehall to make the budget balance. Money is very tight.

“One of our great worries is that the Government is running short of money and will start to raid budgets in areas that matter to local government and the region.

“We are trying to hold down council tax as far as we can, but should there be any further cuts in local government, this would be very difficult to achieve.”

Peter Atkinson, Conservative MP for Hexham, said: “I think it will be bad news not just for the North East, but a lot of the country as a whole, I suspect, because he is going to have to make savings.