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HEADS YOU WIN; BUDGET 2007 2p off basic income tax Lowest rate for 75 years Help for OAPs and families.

Byline: By James Lyons and Magnus Gardham

GORDON BROWN produced a shock 2p income tax cut yesterday in his last Budget before he becomes Prime Minister.

The dramatic move by the Chancellor means the basic rate will fall to 20p, its lowest level since 1932, in April next year.

At the same time as cutting the basic rate, Brown will axe the lowest 10p tax band.

But he boosted benefits and tax credits to help old folk and families with children.

And Treasury sources insisted that 200,000 Scots families and 50,000 Scots pensioners would be better off.

Scotland will also get almost pounds 2billion in extra public spending over three years.

Brown is expected to take over from Tony Blair at No 10 within months. And his 11th and final Budget delighted Labour MPs.

His backbenchers cheered as he told the Commons: "This is a budget to expand prosperity and fairness for Britain's families.

"It is built on the foundation of the longest period of economic stability and sustained growth in our country's history."

Brown aides say the average family, earning pounds 27,000 a year, will be pounds 500 better off from next April because of the Budget.

A couple with two children will be able to earn pounds 24,250 before they pay any tax - up from pounds 22,500.

The starting threshold for the top 40p rate of income tax will rise to pounds 43,000 from 2009. But Brown also raised the ceiling on national insurance contributions to the same level.

Child benefit will rise from pounds 17.45 to pounds 20 a week for the first child in 2010.

And pensioners will see the pension credit - their guaranteed weekly income - rise from pounds 114 to pounds 130 by that year.

Income tax allowances for OAPs will rise from pounds 7280 to pounds 9770 over the same period.

Brown pledged that 600,000 old folk across the UK would be freed completely from having to pay tax.

The inheritance tax threshold will rise to pounds 350,000, and savers will be allowed to hold pounds 3600 in cash in a tax-free ISA instead of the current pounds 3000.

There were losers as well as winners from Brown's tax changes. Single people on pounds 5000 to pounds 15,000 who do not qualify for tax credits will lose out when the complex new rules come in next April.

But the Chancellor had good news for 125,000 people whose finances were ruined when the companies paying their private pensions went bust.

He announced that the the Financial Assistance Scheme, which allows pensioners to claim up to 80 per cent of what they lost, will have its funding increased from pounds 2billion to pounds 8billion.

Drivers had little to celebrate from the Budget. Brown announced that fuel duty would rise by 2p in six months time, by another 2p next year and by 1.8p more in 2009.

The owners of gas-guzzling 4x4s and other large vehicles face road tax bills of pounds 300 this year and pounds 400 in 2008. But the greenest cars will cost nothing to tax.

Smokers were clobbered yet again, with Brown announcing an 11p rise in the price of a packet of 20 cigarettes.

But he did offer help to those trying to quit, by cutting VAT on nicotine patches and gums from 17.5per cent to five per cent from July.

Drinkers face duty increases of a penny on the price of a pint of beer or cider, 5p on a bottle of wine and 7p on a bottle of sparkling wine from midnight on Sunday. The rises are in line with inflation.

Brown froze the duty on spirits for the 10th year in a row and was praised by the Scotch Whisky Association for helping their industry cope with rising costs and the high price of new investment.

The Chancellor's cut in income tax will be matched by a 2p cut in the corporation tax paid by large firms, from 30p to 28p.

Brown said the new rate would be "the lowest of all the major economies".

However, small companies face a 2p increase, to 22p, over the next three years.

Brown promised that spending on education south of the Border would rise above the level of inflation.

He found pounds 400million for the Armed Forces to help fund the wars in Iraq and Afghanistan and another pounds 86million for the security services.

But other Whitehall departments are preparing for a big squeeze on spending as ministers demand efficiency savings of pounds 26billion.

Six ministries, including the Treasury, face real-terms cuts.

Brown also announced that he would sell pounds 36billion of Government assets, including the "book" of student loans debt.

Opponents accused the Chancellor of using "smoke and mirrors" to try to grab headlines and boost his future prospects as Prime Minister.

SNP leader Alex Salmond said: "As is usual with Brown, the devil is in the detail."

Tory leader David Cameron claimed Brown was trying to buy the support of Labour MPs with the 2p tax cut.

He told the Chancellor: "You normally do that before a general election but you are in such a deep hole you have had to do it before the leadership election."

Lib Dem leader Menzies Campbell also accused Brown of focusing on the Labour leadership and said he had delivered "a Budget of missed opportunities".

Bookies Coral reacted to the Budget speech by slashing their odds on Brown succeeding Blair from 1-10 to 1-1000.

Spokesman Simon Clare said: "Gordon Brown has saved his best Budget speech for last. He is now the biggest certainty in the history of political betting to become the next leader of the Labour Party."
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Publication:Daily Record (Glasgow, Scotland)
Date:Mar 22, 2007
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