Cutting the cake

With the average person now paying 38% of their income in taxes, chancellor Gordon Brown's Budget last week didn't really have potential to extract much more without risking public wrath. Brown was never going to gamble on losing his inheritance.

Public spending, however, is another matter. As Brown struggles to balance the books, spending will have to be cut by around £8.5bn a year from the next comprehensive spending review period, which kicks off in 2008.

Lobbying to win a healthy slice of CSR 07 is already under way, and everyone acknowledges that a share of this particular cake won't come easily. Our feature on page 18 plays out the debates over priorities that are starting now and will continue over the summer.

Perhaps perversely, although money is tight, one of the costliest spending areas is emerging as a top priority. After decades of procrastination and under-investment, the infrastructure issue now has to be tackled. It is impacting on all aspects of regeneration, from housing growth to the international competitiveness of our cities.

The early indications are that the Treasury is set to make infrastructure a priority in CSR 07. But that does not mean that it will be picking up the whole £36.7bn bill for the infrastructure needed in the South-east over the next 20 years. The private sector will be expected to make its contribution, through the highly controversial planning gain supplement. In the meantime, the ODPM and English Partnerships are establishing their own Urban Finance Unit to leverage private finance (see Out of Whitehall, page 10). Already 10 cities around the UK are talking to EP about implementing their own version of Milton Keynes' "roof tax", developed to provide essential infrastructure.

You may have come away from the Budget feeling that your personal finances did not come under pressure. But with the Treasury struggling to make the public spending cake big enough to satisfy the nation's appetite for roads, rail, schools, hospitals, homes, and, of course, gold medal winning Olympic athletes, your business is going to have to pay.