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Budget 2010: Political with a capital ‘P’

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24th Mar 2010
Deputy Editor Sift Media
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Frank Haskew, head of tax, and Anita Monteith, SME and personal tax technical manager of the ICAEW, explain why the latest Budget is light on practical new measures and heavy on politics.

AccountingWEB last spoke to Frank Haskew after the chancellor’s Pre-Budget report in December, when many commentators were arguing that the government had got bogged down in politics and hadn’t gone far enough to tackle the public deficit. Has the situation changed this time around?

 “It’s been a political Budget with a capital ‘P’ this time,” commented Haskew. “Generally people weren’t convinced by the measures he set out to reduce the public sector deficit, but obviously it wasn’t quite as bad as forecasted in the PBR”.

The chancellor didn’t bring anything new to the table when it comes to personal tax, but there were a couple of welcome surprises for businesses.

“He’s doubled the AIA limit from £50,000 to £100,000 – that was a surprise particularly as a lot of people were taking bets on whether the Conservatives abolish it altogether if they came to power. That will be an interesting one to watch over the next 12 months,” said Anita Monteith.

It might not be quite as effective as the chancellor thinks, however. “Politicians think you can influence spending by throwing money at it, but most businesses only spend money when they need to. I am quite surprised he thinks people are going to rush out and spend £100,000 when they haven’t already Budgeted that in. That’s quite a sizeable investment for a small business”, she added. However, she did praise the government’s decision to double the entrepreneurs’ relief, saying it was a “good thing” for UK enterprise.

Another key measure was the introduction of a new scheme which gives an independent adjudicator the ability to overturn a bank’s decision to deny loans to small companies. Haskew describes this measure as “a bit of a bolt from the blue”, adding: “It seems like a strange measure to force banks to lend to people when perhaps their credit decision was not to lend. That would certainly raise questions about what would happen if things started going wrong, who would pick up the tab for bad debts and what guarantees there might be”.

It’s also a marked contrast to other measures introduced aimed at increasing competition in the banking sector and facilitating new entrants into the market, Haskew noted.

 

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