I've been trawling through the small print of Gordo's final budget to see how he got the fiscal arithmetic to add up, without needing to include those inevitable post-election tax rises.
The answer's quite simple: he's just assumed that somehow he'll get sharply higher tax revenues without the need to raise tax rates. Simple as that.
So income tax is projected to generate £4 billion more next year than would be implied by his GDP growth forecast, and corporation tax a staggering £8 billion more.
4+8= 12...why, that's pretty well the figure the IFS and others are pencilling in for those tax increases.
But...splutter...he can't just do that can he? How's he got the brass neck?
Well, of course, the small print burbles on about fiscal drag, and on the big £8 billion corporation tax figure it adds:
'...above trend growth is expected in 2005, as the remaining slack in the economy is absorbed. Receipts growth in 2005-06 should also benefit from financial company taxable profits returning towards trend, the impact of higher equity prices on receipts from life assurance companies and the impact from of anti-avoidance measures.'
These effects are expected not only to stick, but actually to increase further out in the forecast. So by 2009-10, tax, national insurance, and other receipts are forecast to have increased by no less than 2.3 per cent of GDP, despite there being no explicit increases in tax rates beyond what was announced last week, plus the usual price indexation.
However, as others have pointed out, 2.3 per cent of GDP in 2009-10 will be £35 billion. So instead of the £35 billion spending cuts Labour say the Tories will make, under Labour we'll have £35 billion of extra tax.
A neat equivalence.
And of course it's bitterly ironic that Gordo's got to depend on the City to pull the fiscal fat out of the fire. New Labour have subjected the financial sector to such a torrent of taxation, regulation, and general vilification that it's a wonder we still have a stock market or any financial firms left to tax at all.