Brown's final budget becomes a taxing event

London Briefing/Fiona Walsh:Time was when "prudence" was the word most frequently associated with Gordon Brown. The chancellor repeated it like a mantra and spread betters wagered small fortunes on how many mentions dear "prudence" would receive on budget day.

Now, however, after his 11th and almost certainly final budget, "prudence" is but a distant memory. "Smoke," "mirrors" and "con trick" have overtaken it as the words now inextricably linked with Britain's chancellor of the exchequer. After a decade at the treasury, Brown gave a supremely confident performance at the despatch box last week, whipping through his speech at such a pace that it looked for a time as though he would beat the 140-year record set by Disraeli for the fastest-ever budget speech, at just 45 minutes.

In the end, Brown missed that record by three minutes. But it was those final three minutes that grabbed the headlines, as he signed off with a wholly unexpected cut in standard rate income tax, from 22 per cent to 20 per cent.

It was a theatrical move that wrong-footed opposition leader David Cameron and had Labour backbenchers waving their order papers in delight.

As always, however, the devil is in the detail and it did not take long for the more numerate to realise relatively few would benefit from this headline-grabbing move.

Indeed, because Mr Brown also abolished the lower 10 per cent rate of income tax, some of the lowest-paid in the country will actually end up handing over more of their income to the government. Hence the "smoke and mirrors" accusations, as the tax cut was labelled a "tax con".

The abolition of the 10 per cent starter rate of tax would simplify the tax system, Brown said. He neglected to remind us that it was he who introduced the tax in the first place, in his 1999 budget when, with great fanfare, it was hailed it as a major boost for the lower-paid.

At the same time, many middle-income families will be no better off after last week's budget as the chancellor also raised the upper earning limit on national insurance contributions.

The real winners, it seems, are wealthy pensioners with incomes of £43,000 (€63,000) or more a year, who are in line for generous tax cuts of up to £1,500 a year. Other surprise winners from Brown's swansong budget include buy-to-let investors, whose ranks have swelled massively in recent years on the back of the boom in the property market. They gain because of an increase in the higher rate tax threshold, as well as the 2 per cent basic rate tax cut. Overseas property investors also received a budget boost, with the scrapping of a tax on assumed rental income from a property, whether it is let out or not. The chancellor's budget was clearly delivered with his next job very much in mind. As he prepares to move from Number 11 to Number 10 Downing Street in the next few months, he handed a bonus to big business with a 2 per cent cut in corporation tax, from 30 per cent to 28 per cent. As he proudly told us, this gives Britain the lowest rate of corporate tax among the G7 nations of the US, Japan, Germany, Britain, France, Italy and Canada.

But while the move was welcomed, there is some scepticism that it will do much to increase Britain's attractiveness for inward investment, with most overseas companies basing their investment decisions on factors other than tax.

And Britain still lags behind other countries such as Ireland, with its 12.5 per cent rate, as well as Austria and Portugal.

Among small businesses, there were howls of protest as Brown hit them with an increase in corporation tax from 19 per cent to 22 per cent by 2009.

As one commentator put it: "What the Gord giveth, the Gord taketh away."

Fiona Walsh writes for the Guardian newspaper in London