A tax on private jets can’t disguise Osborne trickery

George Osborne has been busy leaking his own Budget to deflect attention from the fact that he is going to make 700,000 families in the 'squeezed middle' worse off by dragging them into the 40 per cent tax band for the first time.

The Chancellor could have raised the threshhold for the higher rate of tax, but has decided that it will begin to bite on families earning around £42,000. As many will be 'natural' Conservative supporters, this has caused consternation in the Conservative high command.

But the underlying problem with his so-called Budget for Growth, to be delivered in the Commons tomorrow, is that he doesn't have any money to give away. So the briefers at the Treasury have been active spraying pages from the Budget around the press to make it look as though the Osborne strategy is fair.

Having been attacked for going soft on the bankers by refusing to tax their bonuses, Osborne's aides have been briefing that he intends to squeeze the rich.

His latest wheeze is to slap a tax on their private jets. This little nugget was handed to the BBC this morning, while the /Guardian/ reports he will say HM Revenue & Customs will be able to boost tax receipts by £1bn a year over the next four years by clamping down on perks for the rich in the form of "disguised remuneration", where tax is avoided by the use of employment benefit trusts and pension schemes.

The Daily Telegraph and the Daily Mail were given a few sweets by the Treasury with identical reports saying Osborne would axe a planned £140m tax on passenger air travel proposed by Alistair Darling when he was the Labour Chancellor to save families from higher taxes on their holidays. However, in the small print, the Mail had to admit: "With fuel duty rising on airlines, it is unlikely that passengers will see any appreciable cut in the cost of plane tickets."

The uprating of duty that will be imposed tomorrow is usually a closely guarded Treasury secret because the rates come in at midnight, and changes could cause panic buying of booze or fuel. However, the Mail was able confidently to predict that the duty on wine will rise by 13p, spirits will go up by 51p and strong beer by 3p a pint with 15p on a packet of cigarettes.

In addition, the Treasury has been laying the ground for several weeks for a cut in the planned 5p-a-litre rise in the cost of petrol, showing that unlike Gordon Brown, Osborne is going to be the motorists' friend. However, what the briefers forget to explain is that the soaring cost of fuel has led to a surge in income from the Treasury's existing 66 per cent take in duty and VAT from the pump price of petrol, so Osborne can easily afford his largesse to motorists.

This 'smoke and mirrors' approach to delivering Budgets has been used by Chancellors for decades. Denis Healey did it. Geoffrey Howe did it. And Gordon Brown tried to do it. Poor old Gordy came unstuck when he slashed income tax by 2p to 20p in the £ for middle-income earners, but paid for it by abolishing the 10p tax rate for the very low paid. When bovine MPs who cheered him on the day discovered what he had done, they rebelled and he had to compensate millions of taxpayers.

Osborne is trying to present himself as the first honest Chancellor in decades with another wheeze. He is expected to announce his intention some time in the future of ending the fiction that National Insurance Contributions (NICs) are anything other than a form of income tax.

The Chancellor is planning to say he is so keen to give the public the truth that he will add NICs to income tax so that they will see just how much they are taxed.

With NICs at 11 per cent, that means those dragged into the higher rate of tax will be paying 51 per cent of their incomes to HM Revenue and Customs and the rich on the upper rate of tax will be paying 61 per cent.

Osborne knows it is risky, telling taxpayers that they are paying more than half their income back to the Government. However, he will balance the pain by announcing he is lifting the threshholds at the lower end to take more low-paid people out of tax. He will also say that he will help jobless young people find work with schemes funded by money from the government's £2.5bn levy on banks.

If all this gives the impression that he is giving with one hand and taking back with the other, you are right. If Osborne wanted to be really honest tomorrow, he would stand up and say: "I've no money. I've nothing I can do for now. See you next year."

Instead, he is dusting down the magic wand and the magician's kit in order to conceal his tricks. He may stand outside Number 11  holding up his battered Budget box in the traditional manner, but when he gets to the Palace of Westminster, he will have turned into Paul Daniels. ·