Balls calls for temporary VAT cut – what would you propose for the upcoming Budget? | AccountingWEB

Balls calls for temporary VAT cut – what would you propose for the upcoming Budget?

Over the weekend shadow chancellor Ed Balls increased pressure on George Osborne to cut taxes in his Budget next month, including a reversal of the VAT increase, warning the chancellor that Britain risks entering a depression akin to that of the 1930s if he fails to spur growth.

Speaking on the Andrew Marr Show, he said: “We need some stimulus into our economy to get the economy moving. To get growth and jobs back is the only way to get the deficit down.”

Click here to watch part of the interview with Ed Balls.

Balls’ ideas include a VAT cut, a 3p income tax cut for a year, bringing forward the planned personal allowance rise to £10,000 and higher tax credits.

He told Andew Marr: "A VAT cut is the fastest and fairest way to do a temporary boost to demand to get confidence moving."

The Lid Dems also applied pressure on Osborne to raise personal tax allowances further and faster in the forthcoming budget as a way of stimulating the economy.

What do you think would make an impact on boosting economic growth?

robertlovell's picture

UK200Group on Ed Balls' suggestions for next Budget

robertlovell | | Permalink

Members of the UK200Group of independent accountancy and lawyer firms have today commented on suggestions made by Shadow Chancellor Ed Balls that next month’s Budget should include a cut in VAT, a 3p income tax cut for a year, higher tax credits and the bringing forward of the planned personal allowance rise to £10,000. Mr Balls says including tax cuts in the Budget will help boost growth.

David Ingall, JWPCreers

“Whatever anyone wants to happen, the essential element must be confidence boosting.

“Slashing red tape is probably more important than tax cuts. The realisation that a particular form or procedure is no longer required, saving hours a week for SMEs, will be more uplifting than all but the most outrageous of tax cuts.

“Mr Balls’ suggestions take us back to the smoke and mirrors of the previous government. A cut in VAT would make a good headline and cut the cost of living. Two for the price of one!”

Ian Abrey, partner, Hillier Hopkins

“It is always easier to give away tax revenues when you are not responsible for balancing the Budget!

“Mr Balls does not say what the total cost of the proposed measures would be and there is no guarantee that the windfall would find its way into consumer spending to give the UK economy a nudge in the right direction. 

“The Governor of the Bank of England has recently suggested that higher household saving will be a feature of 2012 and it is quite possible that the proposed cuts would just find their way there; weakening the public finances without boosting economic growth.”

Andrew Watkin, Baker Watkin

“It's a balancing act. On the radio this morning, I heard reports that growth in the UK may be stronger than we think – or so the Press would have us believe.

“We are told by Moody's that the UK could lose its prized AAA credit rating in the coming 12 to 18 months by citing the weakening macro-economic environment and the UK's exposure to the Eurozone.

“Who do you believe? Will the odd tweaking here and there make any difference when it is really just playing politics?

“I do believe raising the personal allowances to £10,000 per annum is a good thing as those who are not so well off will see a long term permanent increase in their income, whereas a reduction in VAT would only be temporary.”

listerramjet's picture

balls pressure, or just balls?    1 thanks

listerramjet | | Permalink

balls pontificating on the BEEB is hardly adding pressure, given the current problems in euroland for example.  Balls of course was a member of the cabinet that got us into this mess - would quite like to see him sewing mailbags!  Would quite like to see more efforts put into to cutting government deadweight - they could start with the fig trees in portcullis house.  But from a tax perspecive, how about increasing personal allowances to get the lower paid out of the tax base.  And scrapping the 50% rate which would increase the overall tax take.

Introduce further IT banding

the_fishmonger | | Permalink

In considering that, from April 2013, all employers will be required to use some form of software to allow for implementation of real time reporting, why not add in 10% & 30% tax bands or more. It would be a move that would smooth out the ridiculous sudden hit of 20% of every pound earned over an arbitrary free pay amount (and similarly at the 40% boundary), having just been hit by NI as well.

With the merging of NI and PAYE in mind, this could be a simpler solution to the 'how do we merge them' conundrum - set free pay at, say, £5k @ 0%; Next £5-10k @ 5%; £10-15k @ 12.5%; £11-15k @ 20%, etc. up to perhaps 55/60% on some top slices.

To curb the high-flyer salaries, one could introduce a punitive 80+% on all earning over £100k but reduce the tax where a true performance related measure can be demonstrated - e.g. football strikers must score a goal every three games to justify the win bonus, but then pay tax at 30%. Most such high earning jobs have clear KPIs that could be used for this, I would expect.

It might also help government as a persuader for larger companies to employ two people on half the salary where these are over-bloated. Reducing the burden on society as a whole by increasing employment. There was an example of a Network Rail employee interviewed for radio who stated he deserved his £110k pa because he had to work 14 hour days. Split the role and pay £55k, each working a normal day, less mistakes from fatigue, healthier workers and two brains for the just a little under the same price.

<sorry for the mini-rant, but it seems obvious to do the latter>

John Stokdyk's picture

CBI urges loosening purse strings to fuel growth

John Stokdyk | | Permalink

Coinciding with news that government borrowing was lower than expected and that the current budget surplus was £11.8bn in January,the CBI called on the Chancellor to invest for growth in his March Budget.

The CBI’s 2012 Budget submission urged the government to introduce targeted changes to the tax system to maximise the incentive for businesses to invest in Britain. Its suggestions include a new capital allowance to attract investment into types of infrastructure which do not currently qualify; new forms of finance to help companies grow and take on staff; and ways to ensure environmental taxes help to encourage new growth.

Several of the CBI’s proposals respond to ideas that the Chancellor floated in his Autumn Statement, such as:

  • Simplifying the UK’s Controlled Foreign Companies regime and making the investment “gateway” within current draft legislation less complicated
  • A new capital allowance to attract investment into types of infrastructure which do not currently qualify.
  • Expand the Enterprise Investment Scheme to reduce the cost of raising equity for small and medium-sized businesses; and improving incentives for entrepreneurs’ relief, as soon as the public finances allow.
  • New private finance models to stimulate infrastructure investment
  • Non-bank finance for mid-sized businesses through a corporate bond market, incentivising corporate venturing, and through the Business Finance Partnership
  • Formulating the bank guarantee scheme to ease credit.
  • Extending the Youth Contract, which needs to be extended to 16 and 17-year-olds
  • The New-Build Indemnity Scheme to unfreeze the housing market.
  • Replacing the Carbon Reduction Commitment (CRC) with a new Climate Change Levy (CCL).
  • Getting the increase in Air Passenger Duty right.

“Delivering private sector investment in infrastructure, supporting mid-sized businesses, hammering out the details on credit easing, extending the Youth Contract to 16 and 17-year-olds, and introducing the New Build Indemnity Scheme for mortgages at the earliest opportunity will all provide a real boost for UK growth and jobs,” said CBI director-general John Cridland.

For more details, see the  Full CBI Budget submission (PDF) 

UK not attractive.

Dutchnick | | Permalink

Our new pan Europe business, a joint venture between some of the larger players in our sector has had a three years gestation. It has always been assumed that on commencement we would be based in the UK (Reigate/ Redhill area) for Heathrow/Gatwick/London availability but is has been decided not to relocate. Though projected to have a staff of around 40 (well paid) at the end of year two, the four directors have found the 50p rate excessive, certainly when coupled with the other costs. But other factors have been apparent, poor future for flight connections with the SE airports (already over full) and the perception of poor state education for the relocating staff. The  sadest factor is the anti business rhetoric, typically the Tesco work placement scheme which was viewed as quite imaginative and yet howled down and though that in itself is not important it is indicative of an attitude. Stephen Hestor's treatment was another example. A dynamic and successful leader of his company, with a contract, does a good job and is hounded for doing well!  Does the UK want success? The threat of Miliband and Balls being let near the economy was the last straw and the sad consideration the the UK is unlikely to be a good place for business.

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Find out all about the political compromises, technical background and taxation wishlists that surround the chancellor's Budget statement.