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The sum of the parts

Looking back at the pluses and, mainly, minuses of Labour’s Budgets

14 consecutive Labour Budgets and it remains to be seen whether it will be the last for a few years. The question is whether we are in better shape financially? Responses from accountants and financial advisers on Labour Budget changes have been loaded in the negative.

The decision in Gordon Brown’s first Budget in 1997 to scrap the dividend tax credit tops most people’s list as a whopping negative. It has led to the closure of dozens of finalsalary schemes and now millions of people’s pensions will be reliant on the vagaries of the stockmarket.

The Government also removed the tax credit on dividends for Isas, which has rendered equity Isas as next to useless from an income tax saving for a basic-rate taxpayer.

The stakeholder pension, hailed as a saviour to the pension timebomb, was a spectacular failure and there are plenty of doubters pouring water on Nest which will not be fully operational for another six years.

The Government made the most of the housing boom that dominated its first decade. Remember Miras? It was cut from 15 per cent to 10 per cent in 1998 before being scrapped in April 2000.

Then there was stamp duty. When Labour came into power, stamp duty was 1 per cent, whatever their value above the threshold. That has risen to 3 per cent above £250,000 and 4 per cent above £500,000. Stamp duty was worth £1.1bn to the Treasury’s coffers in 1997 – it is now worth £4.6bn.

Headline income tax may have come down but we are paying far more in taxes now than in 1997.

National Insurance, income tax in all but name, has risen sharply over the years. The Government has also played hardball with thresholds and allowances, so the fiscal drag has pulled more workers into the higher-rate taxpaying bracket. Another 70,000 are set to join the higher ranks in the next tax year.

Labour raked in £69bn in income tax in 1997, a take that has risen every year since. In 2010/11, income tax will generate £144bn of revenue, according to accountants Grant Thornton.

Let us not forget the U-turns. The 10 per cent tax band debacle, reneging on the promise of being allowed to use residential property in a Sipp and the turn-round on Asps, consigning pension term assurance to the scrapheap.

On the plus side, you could argue that Brown should be given credit for the Pension Protection Fund, despite its restrictions, and pension simplification, up to a point.

The Isa allowance is now a healthy £10,200 and the VCT allowance has doubled to £200,000 (although you can no longer defer CGT).

Child trust funds may not be the answer to many prayers but many families will have made the most of sheltering £1,200 a year tax-free.

Thanks to a housing crash and the promise by the Tories to raise the IHT threshold, the number of people caught in the death tax trap has dwindled to the lowest since 1938. The Tory promise triggered the Government’s decision to allow spouses and civil partners to use each other’s unused IHT allowance which has cut the number of people paying IHT and made the system simpler too.

But if the thought of Labour’s 14 Budgets makes you feel depressed, at least you can cheer yourself up with a little sharpener or two. Several successive years of the alcohol tax duty being frozen means that your favourite tipple is more affordable today than when Tony Blair entered Number 10 in 1997.

Paul Farrow is digital personal finance editor at the Telegraph Media Group


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