What will Brown's last budget have in store?

Brown's last budget looks set to be the most boring ever, says John Stepek. But that doesn't mean that he won't find some new stealth tax to add to the 99 tax hikes introduced since 1997.

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The key economic event of the week - in the UK at least - is also likely to be the biggest anti-climax.

Gordon Brown's last Budget, says Capital Economics' Roger Bootle, is likely to be 'one of the most boring Budgets ever - and that is against some pretty stiff competition' (much of it from Mr Brown himself, might we add).

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But that doesn't mean he won't find a way to pick your pocket somehow - after all, a Brown Budget just wouldn't be the same without a stealth tax or two, now would it?

The most obvious way to squeeze through yet more tax hikes in Wednesday's Budget is to play the green card. Mr Brown and David Cameron have recently been trying to gain the moral high ground on this topic. The electorate is almost certainly far more concerned about crime and education, as the public generally tends to be, but with global warming the new religion (with The Independent looking more and more like a latter-day version of the Watchtower every day), clearly both Gordon and Dave feel they can't go wrong.

Not that we need more taxes. The shadow chancellor George Osborne, reckons we've seen 99 tax hikes since 1997, and Mr Brown's on for the century on Wednesday. Figures from the OECD have already shown that the tax burden in the UK has already grown from 39.5% of GDP in 1997 to 42.7% this year - one of the biggest increases in the western world, according to The Telegraph.

But which green tax to go for? The latest suggestion is that 4x4s and sports cars will be attacked with higher road tax - having already hiked air passenger duty, which hits less well-off tourists more than the wealthy, he might be tempted to tackle the demon gas-guzzlers to show some semblance of equality. After all, only the well-off drive them and everyone else apparently hates the Chelsea tractor brigade, so it should be an easy grab.

There's also likely to be more 'loophole' closing. We like the way that Mr Brown uses the word 'loophole'; somehow making it seem that perfectly valid ways of making your investments more tax-efficient are in fact sneaky, nigh-on criminal manoeuvres aimed at cheating the State out of its due. We have a sneaking suspicion that he'd like to say: 'We've decided to shut a loophole that allows higher-rate taxpayers to keep a full 60% of their income above the £35,000 mark, by raising the higher-rate tax rate to 100%.'

Then of course, we'll have the crowing about his economic forecasts. He looks on course to meet his public borrowing target of £37bn this year, which he will certainly be pleased about. But in reality, this is nothing to be proud of. As Bootle reminds us, six years ago the Chancellor predicted public borrowing this year would be £12bn. That's a margin of error of more than 200% - even Michael Fish would laugh at that forecasting track record.

And then there are his much-vaunted rules. There's his golden rule, which has been yanked and manipulated so much it should really be called the elasticated rule. Meanwhile, he claims to have kept government spending to below 40% as a proportion of UK GDP, but 'if you add in all the off balance sheet items and public sector pension liabilities you could readily reach a figure as high as 80%,' says Bootle.

But all in all, Mr Brown may well be quite pleased as he leaves the dispatch box on Wednesday. After all, it looks like he's done a Greenspan (the new term for setting up an economic crash then escaping just in time to leave your successor to deal with the mess).

The only problem for Mr Brown, however, is that if things go his way, he'll be sitting right next door while the next chancellor is reaping what his imprudence sowed. Suddenly the prospect of becoming prime minister just doesn't look as inviting.

Before we turn to the markets, we'd like to mention a webchat happening this afternoon on the MoneyWeek website. James Saunders Watson of JP Morgan, and Justin Modray of IFA BestInvest will be answering questions on the best ways to invest for your children's future at 2pm this afternoon. If you're interested in taking part, or just finding out what they have to say, click here: MoneyWeek webchat.

Turning to the stock markets...

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In London, the FTSE 100 ended Friday 2 points lower, at 6,130, as a surge of M&A activity kept the blue-chip index off an intra-day low of 6,094. Imperial Tobacco topped the FTSE leaderboard with gains of over 4% on bid talk, and consumer goods producer Unilever also performed well on rumours that it is the target of a private equity bid. For a full market report, see: London market close.

On the Continent, the Paris CAC-40 closed marginally lower - down 7 points to 5,382 - as financial stocks including Dexia and Credit Agricole weighed. In Frankfurt, the DAX-30 ended the day 4 points lower, at 6,580.

Across the Atlantic, US stocks ended Friday weaker as higher consumer price inflation data rattled investors. The Dow Jones ended the day 49 points lower, at 12,110, with financials such as JP Morgan, Citigroup and American Express amongst the biggest fallers. The Nasdaq ended the day 6 points weaker, at 2,372. and the S&P 500 dropped 5 points to close at 1,386.

In Asia, the Nikkei passed the 17,000 mark for the first time in a month today, closing at 17,009, as gains for exporters such as Canon and Toyota offset ongoing weakness amongst financials.

Crude oil futures were priced at $57.34 this morning, whilst Brent spot was at $60.64.

Spot gold was last quoted at $655.20 this morning, off an intra-day high of $655.70. Meanwhile, silver had risen to $13.16.

And in London this morning, plumbing giant Wolseley became the latest casualty of the US housing slump, announcing a 15% fall in first-half profit. Despite cutting 4,000 jobs at its North Carolina-based building materials supplier, Stock, and expanding its European operations in reaction to the softer US market, net income had fallen to £209m compared with £245m the previous year. Having fallen nearly 2% on Friday, however, Wolseley's share price had climbed by as much as 3% in early trading today.

And our two recommended articles for today...

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John Stepek

John is the executive editor of MoneyWeek and writes our daily investment email, Money Morning. John graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news. John joined MoneyWeek in 2005.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.