Another old Labour story: taxes are rising

Yesterday I reported that unemployment was rising under Labour. Today, it’s the turn of income taxes. Hard working taxpayers are being squeezed as never before.

Taxes on average incomes are at their highest since records began in 1987. The Office of National Statistics reports that taxes on incomes are now 23.6 per cent of wages and salaries.

This must be borne in perspective; taxes on average incomes have hovered between 20 and 23 per cent throughout the two decades in which they have been measured. But taxes are creeping up, with no sign now that in the near future they will be reigned in.

The squeeze is especially painful for two reasons. Firstly, it is outpacing rises in wages: taxes rose by 6.7% compared to wage rises of 4.6%. Secondly, this comes as other inescapable costs are also rising: interest rates are rising; inflation is rising; utility bills are rising. Consumers are under intense strain. This year’s Christmas cheer is increasingly being funded by savings rather than income, which can only be a short-term solution.

2007 is likely to be a very happy new year for Gordon Brown as he finally realises his lifetime ambition and moves into Number 10. In doing so, he will leave behind a Treasury in a parlous state. Whomever he makes his Chancellor (and my bet is on Alistair Darling) will inherit a poisoned chalice; inflation, unemployment and taxes are all rising as Brown’s public sector profligacy bites home. A happy new year for Mr. Brown, perhaps, but for the rest of us, the long hangover is coming.

Pre-Budget report is final nail in Stern coffin

Just weeks after the publication of the Stern Review into the economics of climate change, the author has quit the Treasury. Sir Nicholas Stern, Second Permanent Secretary and a former head of the Government Economic Service, will leave in March for a new job at the London School of Economics.

Sir Nicholas was brought into the Treasury in 2003 as part of an effort to wean Gordon Brown off political advisers. It was hoped that he would add some genuine, impartial economic advice. But this entailed a few too many home truths; Treasury insiders have said that Sir Nicolas’s long-term growth predictions were not as rosy as Mr. Brown’s.

On Wednesday the Chancellor gave his pre-budget report to the House. The environmental measures were weak – road transport is still the cheapest it has been for a quarter of a century – and it is believed that Sir Nicholas had to fight hard even for these.

The pre-budget report is the final nail in the coffin of Sir Nicolas’s efforts to inject some greenery into this Government. Brown’s unwillingness to move from taxing work to taxing pollution shows him to be unimaginative and unconcerned with environmental issues.

Sir Nicolas’s departure also highlights the Chancellor’s dislike of advice from beyond his inner circle of acolytes. Any hopes that the era of sofa government will end with Tony Blair’s retirement look sadly misplaced.