As political parties step up their campaigning ahead of a general election due by June 2010, voters need to know exactly how politicians plan to tackle a projected deficit of 175 billion pounds, says Stephen Herring, senior tax partner at accountancy firm BDO LLP.

In a report titled "Time to Break the Silence" BDO suggests there will not only be cuts in public spending, but substantial business tax increases.

The firm argues that voters have the right to be properly informed about where the changes will be made and says that an additional 25 billion pounds a year in taxes might be required in the medium term to rebuild national finances.

"It may come as little surprise to see that almost every business is expecting to be hit by tax rises next year, but it's disappointing to see that even after the [political] conference season, we're still in the dark over the parties' tax policies," Herring said.

As the annual chore of filling in tax returns looms on the horizon again, many taxpayers might be reflecting longer than usual this year about just where the money is going.

Since the last time he ripped open the blue cellophane HMRC envelope with a sigh and started hunting around for his P60, Joe Public has seen billions of pounds going to the banks, thousands if not millions being used to bankroll the expensive tastes of MPs — and now he sees the BBC clamming up about how much it spends on stars from that other effective tax, the licence fee. 

Parliament’s Public Accounts Committee, to which the National Audit Office spending watchdog reports, is fuming because the BBC will not reveal how much it pays its big-name radio presenters. 

The BBC Trust says it keeps salary details confidential because it has legal obligations to staff and that disclosure would raise questions over data protection and privacy laws.

The generosity of BBC salaries has been a long-running theme, especially since it was reported last year that Jonathan Ross receives some six million pounds a year. Newsreader Carrie Gracie raised eyebrows more recently when she revealed she gets 92,000 pounds a year.  

The Corporation says it merely pays the going rate and in some cases less. It has launched a comprehensive redundancy programme and has confirmed that its stars’ salaries will be cut when contracts come up for renewal.

BBC Director-General Mark Thompson has staunchly defended the licence fee, calling it a “critical part of this country’s investment in the creative industries”.

But is it enough? After the jaw-dropping revelations about the way MPs spend public funds, taxpayers are perhaps rightly suspicious about what happens to their money behind closed doors.

Should BBC salaries remain confidential?  Does the BBC have a right to withold information from the National Audit Office? 

Smokers and top earners were clear losers in Britain’s budget this year, as the government hiked taxes on cigarettes and the highest incomes.

But a lucky few must have been cheering in front of their televisions during the 51-minute speech.

Budget-watchers who bet hard cash that the chancellor of the exchequer, Alistair Darling, would wear a grey or blue tie to his address got a welcome bit of stimulus from the budget.

Betting firm Ladbrokes was giving odds of 3/1 and 16/a for a blue and grey, respectively. Perhaps aware of the odds, Darling put on a blue-gray striped one, and Ladbrokes paid out for both colours.

“We thought it was blue at first, but as the hour rolled on we decided that, much like the content of the speech, it was in fact grey,” Ladbrokes spokesman David Williams said.

The real money came with real risk, howerver. If you wagered 20 pounds that Alistair Darling would let loose with the word “depression” during his speech — many thought it too gloomy to say out loud — the return was a cool 320 pounds.

Smaller, but by no means negligible, reutrns were reserved for bets on the words “downturn”, with 4/5 odds, “recovery” at 1/5, and “credit crunch” — still profitable with odds of 3 to 1.

There was no mention at all, however, of the one word that drew more bets than all others put together: “sorry”. Odds that Darling would apologise about the state of the economy, always a long shot, narrowed from 20/1 to 4/1 in the run-up to the speech, the betting firm said.

And for those who take their thrills wherever they can find them, spread betters were offering an over-under spread of 54.5 to 56 minutes for the length of Darling’s speech.

He managed to keep it gonig for 51 minutes this time around, just under a minute longer than last year.

Here is a guide on what the pre-budget report means for personal taxation by accountancy firm BDO Stoy Hayward.

Income tax - changes to allowances and rates

The basic personal allowance for 2008/09 was increased above inflation from £5,225 to £6,035 as a one off measure to compensate for the loss of the 10 per cent starting tax rate.

For 2009/10 the personal allowance will be increased by £130 above inflation from £6,035 to £6,475. All other allowances, the income limit for age-allowances, the minimum amount of married couple’s allowance and the starting rate limit for savings will be increased in line with inflation.

For 2010/11, the basic personal allowance will be reduced in two stages as follows:

• where an individual’s gross income exceeds £100,000, the allowance will be reduced by £1 for every £2 of income above the limit up to a maximum of 50 per cent of the basic allowance
• where gross income exceeds a second limit of £140,000 the allowance will be  further reduced by £1 for every £2 of income above the limit up to a maximum of the full personal allowance.

There are no changes in respect of the basic and higher rates of tax for 2009/10 and 2010/11. These will remain at 20 per cent and 40 per cent respectively. The basic rate band limit will however be increased by £800 above inflation to £37,400 for 2009/10.

For 2011/12, a new 45 per cent rate will apply to taxable non-savings and savings income above £150,000. As a consequence of this change, a new rate of 37.5 per cent will apply to taxable dividend income above £150,000 thus introducing a third tax rate to be applied to dividends.

These changes will also apply to trusts where the trust rate and dividend trust rate will increase to 45 per cent and 37.5 per cent respectively from 6 April 2011.

How this affects you

By 2011/12, the Income Tax position for those earning less than £100,000 or more than £150,000 will be simple. Those earning less than £100,000 will have a full personal allowances and a top rate of 40 per cent. Those earning more than £150,000 will have no personal allowance and a top rate of 45 per cent. For those earning between these amounts the position will be complicated – the top rate of tax will be 40 per cent but the amount of personal allowance will vary.

Pension schemes

The maximum annual contribution limit will be frozen at £255,000 from 2010/11 to 2015/16.

The lifetime allowance will also be frozen at £1.8m from 2011/12 to 2015/16.

How this affects you

Taxpayers are advised to look at some planning. With careful planning, tax relievable contributions of up to £510,000 or more can be made in a single tax year. Therefore, higher earners may want to defer pension contributions until the higher rates apply after 5 April 2011.

Extension to list of qualifying ISA investments

Under existing ISA regulations, only securities issued by a UK or European Government or by a company which has a share capital can qualify as investments for a stocks and shares ISA.

From 16 December 2008 bonds issues by Multilateral Institutions can also qualify.

Multilateral Institutions are inter-government organisations usually involved in global development work – for example, UNICEF, World Health Organisation, African Development Fund.  Many such institutions issue bonds as part of their funding arrangements and extending the ISA regulations to include such bonds is part of the Government’s international poverty reduction agenda.

A full round-up of BDO Stoy Hayward’s pre-budget analysis can be found here

Newspapers were in no doubt of the significance of the pre-budget report – this was a defining moment in British politics.

New Labour is no more, they announced, and prudence has been blown away by a massive gamble for the hearts and minds of the electorate before the next election.

“The landmark mini-Budget was a pivotal moment which will shape British politics for years ahead,” wrote The Independent. “It presents voters with a stark choice between two very different futures: a European-style social democracy under Labour, in which the better-off pay higher taxes to maintain public services, or a nation of lower taxes and state spending under the Tories.”

The Guardian, in an editorial entitled “Everything Changes,” said Chancellor Alistair Darling had read the last rites for New Labour. “He abandoned, through necessity, the deal Tony Blair and Gordon Brown struck with the electorate a decade ago, that progressive politics could be paid for without overt economic pain.”

“The government,” it said “has found a purpose, which is to tax the rich to help the poor, something it has never dared admit openly before. Old political certainties now lie like timber, uprooted in the storm. An extraordinary history-changing contest has been got underway.”

The Times called it a “Robin Hood style budget” and echoed the theme of Labour returning to its left-wing roots. “When faced with difficult choices in a serious crisis, it has abandoned its new dogmas for old certainties,” the paper wrote. “Opposing the ‘fiscal stimulus’ is perhaps David Cameron’s biggest gamble, given that Britain’s action will be followed by other countries over the next days and weeks.”

Both parties have now hitched their fortunes to the length and depth of the recession, it noted.

The Sun was among the many papers proclaiming the death of New Labour. “In one emergency splurge, a beaming Mr Brown reverted to Old Labour’s natural big government tendency to tax spend and borrow,” it said.

If the gamble fails, Brown will have mortgaged Britain’s future in “an unforgivably reckless budget.”

The Daily Mail called the pre-budget report the most dramatic about-turn in government policy since the 1970s. “Even if the incentives work  -  and there have to be doubts about whether the cut in VAT will trigger spending in our ailing High Streets  -  the truth is that it represents the most monumental gamble by the Chancellor. For it is based on a positively rose-tinted prediction that the economy will start bouncing back by 2010  -  something many experts hugely doubt.”

The Daily Mirror portrayed Brown on its front page as a poker player, holding his cards under the headline “The Gambler.”

“Mr Darling is taking a big chance but the Tories’ do-nothing approach is a non-starter,” it said. “Yesterday was a big moment in post-war politics and the government rose to the challenge.”

Whether the 20 billion pound package of tax cuts and spending stimuli will be enough to see Britain through the next few painful years was a topic of wide debate in the papers but most felt the VAT reduction to 15 from 17.5 percent — a cornerstone of the report — would have little effect.

“The tragedy is that the fiscal stumulus package, led by a small reduction in value added tax, will still fall far short of the desired effect,” wrote the Financial Times. “The UK consumer is now too stunned by the housing crash, stagnant wages and fears of unemployment to be coaxed into resuming the insane credit-fuelled binge of yesteryear.”

Chancellor Alistair Darling has delivered a 20 billion pound fiscal stimulus package to get the nation spending again and mitigate the worst effects of the downturn.

He cut VAT to 15 from 17.5 percent just in time for Christmas shopping – a move he said would put some 12.5 billion pounds in consumers’ pockets over 13 months. Other measures include well-leaked plans to help homeowners, small businesses, parents and pensioners.

But government borrowing will more than double to 78 billion pounds this year and 118 billion next year before starting to come down. Darling says he will bring the public finances back into balance by 2015.

The package now sets in stone the diverging approaches towards the downturn being adopted by the main two parties. Labour is effectively spending its way out of recession, the Conservatives — against the run of most independent economic advice — have opted for caution. Shadow Chancellor George Osborne said the plans amounted to “putting a time bomb,” set to explode in the future, under the nation’s finances.

What do you think? Is this a bold and innovative way to get the economy moving again or a dangerous, debt-fuelled gamble?

David Cameron’s decision to ditch a major Conservative pledge to match Labour spending plans pound for pound was hailed by commentators as an important step in the politics of the recession, opening up a clear gulf between the two main parties’ economic policies but exposing the Tories to considerable risk.

Labour is expected to cut taxes, accelerate public spending and announce more borrowing in Monday’s pre-budget report. Now their supporters can revive the spectre of “Tory cuts” to funding for schools and hospitals which helped the Conservatives lose the last two elections.

For many of the newspapers, this is all part of a game being forced on the Tories by Gordon Brown’s rapid resurgence in the polls thanks to the economic crisis. A Mori poll this week found the once-mighty 26-point Conservative lead has slumped to just three points — equivalent to a Commons majority of four seats.

“In the extraordinary game of chess that is being played out against the backdrop of the recession, Cameron had no choice,” wrote The Independent. “But there are big risks for the Tories. Most non-partisan economists recognise the case for higher borrowing to pay for a fiscal stimulus. The Conservatives are virtually on their own in claiming spending cuts are an immediate answer.

“Spending cuts are also easier to announce than they are to implement, not least when the Conservatives have some ambitious spending programmes of their own. If Cameron comes up with any pain-free cuts, Brown will implement them first, as he did in the run-up to the last election.”

The Guardian said a curiously quiet period in British politics has come to a close with the announcement.

“Over the past few months the economy has been in wartime, beset by a banking crisis and a global recession, while politicians have been unsure how to react. Sure, Gordon Brown got his fill of summit-hopping. But most MPs have been little more than restive spectators of a crisis which will define economic policy for years to come and set the terms of the next election. That all ended yesterday.

“The political battle lines have now been drawn around one key question: who can best manage the recession?”

The Financial Times was in no doubt of the importance of Cameron’s policy tack. “He has taken one of the biggest gambles of his near three-year tenure … bucking the corporate and economic consensus to bet on a fundamental shift in voters’ attitudes in the next election,” it wrote.

“He believes he will be proved right in the long term as the recession deepens and voters increasingly blame Mr Brown for the state of the public finances rather than turn to him as the best hope for economic recovery.”

That may be a good move, the paper added, if the election comes in 2010 but could backfire if, as some commentators are suggesting, Brown decides to go to the country before things get too bad.

Several papers applauded Cameron for opening up a clear choice for voters in how deal with the coming hard times.

“On the big issue of the day, the route out of recession, there is now a genuine choice,” The Times said, while the Daily Mail declared: “With one bold decision, Mr cameron set himself free to offer a meaningful alternative of real substance.”

The Daily Mirror spoke of thick red lines now having been trawn between the two parties and warned the Conservatives  were missing the public mood.

“Every nurse, care worker, soldier and their families now has a vested interest in voting Labour,” it wrote.

But The Sun applauded Cameron’s move. “Labour seems ready to gamble the entire economy on a “cut now, pay tomorrow” burst of tax reductions financed by ever-higher borrowing,” it said. “That is the economics of the madhouse.”

“At last the Tories seem to be finding their voice. They have decided to put hard-working taxpayers first — and dump their daft promise to match Labour’s bloated spending.”

Prime Minister Gordon Brown has suggested he will push expansionary fiscal policies to help boost the economy. Brown’s comments were the latest in a series from him and Chancellor Alistair Darling stressing the importance of boosting the economy, which shrank in the third quarter of 2008 for the first time in 16 years and is expected to contract more sharply next year.

Bank of England Governor Mervyn King has also put his weight behind “some fiscal stimulus”, just as the Bank predicted in its quarterly inflation report that the economy would shrink sharply next year.

But what is the way forward - tax cuts or higher public spending?

The dividing line between Brown and Tory leader David Cameron is whether to borrow to fund tax cuts. Cameron has argued that Britain’s deficit is too high to allow further borrowing. Brown says Cameron’s claim that he can pay for his tax cut by savings on welfare benefits isn’t realistic.

Tax cutting is a populist measure and it may be tempting for Brown, who no longer appears to be married to fiscal prudence, to go down that road, not least because of the backlash he faced earlier this year over scrapping the 10 percent tax band.

But there are a number of reasons why tax cutting may not result in a boost to the economy: government borrowing gets dangerously high and will limit the economy’s ability to recover swiftly from a recession, and people may decide to save rather than spend any extra money they might have in their pocket due to tax cuts.

What’s your view - do you think increased public spending will stoke demand, are tax cuts the way forward to boost the economy or should the government go for a mix of both?

Annual inflation has hit 3.3 percent, its highest level since the Bank of England was given control of interest rates 11 years ago.

But for many their personal inflation rate will be much higher, depending on where they live, and how much of their income is devoted to basics like food and energy costs.

How are rising prices affecting you - have you barely noticed any change, or are you seriously cutting back?

The ever increasing tax burden and Gordon Brown’s woes dominate the front pages today.

The Daily Telegraph reports research has shown that the average motorist is paying more than £600 a year extra in tax under Labour. Story here

The tax burden also makes front page news in the Daily Express which says Prime Minister Gordon Brown has been warned that he must stop tax rises or face defeat in the next election. Story here

The Daily Mail says price rises mean families have less to spend than for 17 years. Story here

Brown’s style of leadership and signs that support for him in his own party is waning also feature heavily on the front pages. The Times says more than half of Labour supporters believe that Brown should stand down to make way for a more electable politician. Story here

Brown also faces new threats to his authority over Scottish independence, 42-days detention and the 10p tax climbdown, The Guardian says. Story here

The Independent leads with the cyclone in Myanmar, saying the country’s military government is obstructing global aid efforts. Story here

The Sun also focuses on the Myanmar cyclone, the “Tide of Death” as it says. Story here