FactCheck: Has Brown put tax up?

Last Modified: 02 Feb 2007
By: Channel 4 News

Gordon Brown is coming to the end of his time at the treasury. So what has his record been?

The claim

"The independent and respected Institute for Fiscal Studies has confirmed that the average family is £1,300 worse off thanks to Gordon Brown's 10 budgets so far."
Conservative Party website, 31 January 2007

Background

Gordon Brown is coming to the end of his time at the treasury. So what has his record been?

Has he been a prudent chancellor, keeping a tight rein on public spending? Or a Robin Hood chancellor, taxing the rich to pay the poor?

After nearly a decade in the treasury, have taxes gone up, or stayed broadly the same, or even gone down?

Shadow Chancellor George Osborne certainly has a view on this question. He seized upon the publication of new research from the Institute of Fiscal Studies to attack the Chancellor's record of taxing the British public.

He claims that Gordon Brown has taken £1,300 out of the pockets of the average family - a terrifying statistic, if true.

The Treasury rebutted this claim, saying that the average household is £950 better off. So who is lying? Or, in the curious world of government finance, can both actually be true?

Analysis

Gordon Brown's figure comes from the Institute of Fiscal Studies' forecast of the chancellor's options for his forthcoming Budget speech. The IFS call it the 'green budget'.

The analysis says that Gordon Brown is raising £40bn more in tax (in 2006-7 terms) than Ken Clarke did during his last year at Number 11. Divide that by the number of 'families' - around 30 million - and you get to £1,300 per family.

The first thing to note is that this method of reckoning is extremely crude. There is no such thing as an 'average' family.

If you were to, say, tax the richest 10 per cent of families a good deal, you would end up with an increased figure for the tax paid by 'average' families, even though the position of 90 per cent of families wouldn't have changed.

It also excludes the extra money paid back to citizens as benefits and tax credits - which is highly relevant.

"If you are looking at how big the state is, it makes sense to look at taxes alone. But if you want to know whether people are better off or not, then you need to look at taxes and benefits," says Stuart Adam of the IFS.

The Institute's most recent analysis of winners and losers from Gordon Brown's budget measures dates from 2005. This gives a more detailed picture of the effects of his tax and benefit changes on different income groups.

Overall, tax and benefit changes resulted not in a £40bn tax take, but a small overall giveaway, with lower income groups better off, and higher income groups paying more.

George Osborne is (partly) attacking measures brought in by his own party.

If you include council tax rises, on the other hand, there was a net tax take. Council tax also hits poorer families more (with the exception of the poorest 20 per cent, who are partly insulated from council tax rises).

There are, of course, several other caveats to be mentioned: much of the extra money raised has been spent on education and health. (Whether it's been well spent is another question).

And it hasn't all been levied directly from the taxpayer; some of those taxes are levied on businesses - only affecting the public indirectly, through their shareholdings and pension plans.

It's also worth noting that, according to the IFS analysis, £10bn worth of the £40bn increased taxes come from measures announced by the Conservatives before the 1997 election. So George Osborne is (partly) attacking measures brought in by his own party.

However, the treasury's counter claim - that the average family is £950 better off - doesn't entirely hold water either.

It excludes all direct taxes, such as VAT, fuel duty and taxes on alcohol, and taxes on business. It also includes benefit payments and tax credits - so not surprisingly it comes out with a rather more government-friendly figure.

FactCheck rating: 2

Verdict

George Osborne is quoting the correct number, but out of context. The result is not a very informative.

There is a £1,300 hole blasted into the wallets of the 'typical hardworking family' of political legend - the Mondeo-driving, Essex-dwelling, swing-voting social beast whose opinions swing elections.

The way government tax and spending affects individual tax payers is extremely complex, and continually changing - so any crude average is going to be a gross and potentially misleading simplification.

Though slightly out of date, the latest IFS analysis suggests that while richer families are paying more tax under Labour, poorer families are better off. And the 'average' family - right in the middle of the income distribution - has been almost unaffected.