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| Tuesday, 26 November, 2002, 19:35 GMT Brown faces housing and pensions storm ![]() Gordon Brown is facing renewed pressure to tackle the house price boom and the pension problem in his pre-Budget report (PBR). The Chancellor, who is to deliver the PBR on the 27th of November, will be facing calls from the TUC for compulsory employer occupational pensions.
Mr Brown is believed to be considering two measures that might be particularly painful - an increase in stamp duty to stop housing speculation, and a cut in the tax relief given to higher rate taxpayers for their pensions.
Redistribution by stealth Mr Brown has already made serious inroads into the wealth of the middle classes. His tax changes since 1997, and especially his new 1% National Insurance levy that comes into effect on 1 April, has led to big increases in the tax burden at the top of the income scale, while his tax credits have helped those at the bottom. And rising incomes have dragged many more people into the top rate of tax, which now starts at just 1 1/2 times average earnings. Although Mr Brown may want to raise stamp duty further, at 3% for houses over �250,000, and 4% for houses over �500,000, it is already having an effect on the middle class in London. A BBC survey for Radio 5 Live predicts that within 10 years one in four people everywhere in the country will be in the higher rate bands for stamp duty, and many more will also face paying inheritance tax for the first time. Pensions dilemma Tony Blair recently admitted that the pensions issue is the most difficult one facing the government. A Green Paper on pension reform will be announced on 17 December, but it is unlikely to contain radical measures. Instead, the government will want to try and reach a consensus with industry and the unions about the best way forward. This could be difficult. Companies are abandoning occupational pension schemes in droves, and the remaining occupation schemes want to raise the retirement age to 70 to reduce their payouts. The unions, meanwhile, want compulsory occupational pensions with contributions of at least 10% from both employers and employees. The government has made it clear it has no intention of filling the breach with an enhanced state earnings-related pension (which it has just abolished). Instead, it wants to encourage cheaper private pensions and higher savings through tax incentives. Corporate Reform Mr Brown also risks alienating the corporate sector in other ways, even as he continues his efforts to encourage enterprise and boost the economy. A new plan for corporate taxation, designed to simplify the system, has drawn the ire of the small business sector. The Federation of Small Businesses says the plan could ruin their members. One consequence of the government's proposed change could be the abolition of capital allowances for investment, which the small business sector has fought hard for. The government is also planning to tighten up on corporate governance in the wake of the US Enron and WorldCom scandals in a new bill, which could require companies to change auditors every five years. But Mr Brown could offer more help to businesses in deprived areas in order to encourage economic regeneration in Labour heartlands. |
See also: 15 Jul 02 | Politics 15 Jul 02 | Business 15 Jul 02 | Business 03 Apr 02 | Business 08 Nov 02 | Business 10 Nov 02 | Business 05 Nov 02 | Business 06 Nov 02 | Business Internet links: The BBC is not responsible for the content of external internet sites Top Business stories now: Links to more Business stories are at the foot of the page. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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