5 Minute Guide: Budget 2007
Updated on 02 February 2007
The Iron Chancellor is ironing out the creases from what will be his final Budget speech. How much cash will there be to spare, and who will get it?
What's happened?
This March, Gordon Brown will present what most people assume will be his last Budget as Chancellor. He's already done the longest stint in Number 11 since the Reform Act of 1832. So, how has he done? And what is his record?
Although he has left the public finances in good shape, don't believe people who say he's presided over the longest period of sustained economic growth ever.
He's managed to cut public debt by £80bn, partly thanks to the sale of 3G mobile phone licences.
Spending is up since he took over, taxes are too, but slightly less. He's managed to cut public debt by £80bn, partly thanks to the sale of 3G mobile phone licences.
Debt is growing, and Gordon Brown will probably meet his self-imposed pledge to balance government spending and income over the economic cycle, but only, some would say, by changing the definition of what an economic cycle is.
That is perhaps a rather academic debate but, more importantly for the average voter (and their kids), the government now faces something of a cash squeeze.
Under the projections set out in the 2006 pre-Budget report, government spending will only grow by two per cent per year from 2008 to 2011.
Why does it matter?
Leaner times at the Treasury mean less money for the government's policy priorities like health, education and poverty reduction.
Financial think-tank the Institute of Fiscal Studies calculates that the government would have to allocate £4.5bn a year to have a 50/50 chance of hitting its target for cutting child poverty in half by 2011.
In its analysis of the most probable scenarios, that would leave room for only a 3.3 per cent rise in spending on the two key areas, health and education.
In 2002, however, The Wanless Review recommended increasing health spending by 4.4 per cent per year - but that would only leave enough cash for a 1.8 per cent rise in education.
What happens next?
The March Budget should contain some clues as to what Gordon Brown's spending priorities will be. In the summer, Brown or his successor will publish the Comprehensive Spending Review, which sets out the government's broad-scale spending plans for the period of 2008 to 2011.
It will be interesting to see if Gordon Brown brings more of an environmental slant to the UK's tax picture, as opposing parties have advocated.
The amount of money raised by green taxes has been falling since 2000, largely because Gordon Brown abandoned the policy of regular increases in fuel tax.
But this will be his first Budget since he published the Stern review, which he commissioned and which pushed the environment up the government agenda. Will he reverse the trend on Green taxation?
And who knows, the Iron Chancellor might even take the chance to soften his public image by knocking a few pence off the price of booze and fags. Well, here's hoping, anyway!
Key players
Gordon Brown
He's coming up for his tenth year in the treasury, and it's expected to be his last.
He inherited a strong hand in 1997, but he has played it well, overseeing 10 years of steady growth and low inflation.
As Chancellor, he used his control over the purse strings to exercise great power across Whitehall. Will his successor do the same?
George Osborne
He will be opposing Gordon Brown at the ballot box. Osborne is the seventh shadow chancellor since Gordon Brown to take the job, and as he was only 33 when he took over, comfortably the youngest.
He hasn't yet had a chance to set out detailed alternative proposals for government spending, as the Conservatives are being careful not to make policy commitments too early in the electoral cycle.
But he has argued for a 'carbon tax', which would charge energy users according to their individual emissions.
Vincent Cable
He has been the Lib Dem's treasury spokesman since 2003. He has opposed the tendency within the party to argue for higher taxes, in particular opposing the iconic 50 pence top rate of income tax, which the party abandoned in September.
He has also pushed for a package of green taxes, including levies on gas-guzzling cars and aviation.
