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Budget predictions - what the papers say by Rebecca Benneyworth

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19th Apr 2009
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With the Budget just days away, I have taken a look at what the predictions are over the weekend - traditionally a time for the heavyweight papers to publish their "Budget leaks". So what do they (and members) think is in store for us?

It is Budget week, and the accountancy profession holds its collective breath. What dreadful plans has the Chancellor in his red box? Judging by the coverage in the lay press, there are a number of options for Mr Darling, and there have been some quite specific pre Budget leaks (or speculation?). So here, we highlight the key predictions in the press over the weekend, and try to sort the wheat from the chaff. We’d also like your responses and predictions for what Wednesday will bring.

The Sunday Times Business section led with an announcement that Mr Darling believes that the slump will end this year, and that the Budget will significantly revise the forecast for the coming year which was made in November 2008. Predictions (in line with the widely reported Ernst & Young Item Club eve of Budget forecast) indicate the economy shrinking by 3.5% this year, but expected 1% growth next year. Some commentators suspect that much of the talk of “green shoots” both here and in the US is as much to generate some optimism as anything else. The paper carries a “Budget Highlights” box on the front page of the Business section, listing the following anticipated tax developments :

• Name and shame list of tax cheats
• Carry back of trading losses by three years extended (much lobbied for by the Tax Faculty and CIOT)

The summary closes with an overall commentary that the Chancellor is expected to leave attacking the deficit (widely expected to be as high as £180 billion by the end of the year) until later rather than risk stalling any recovery with tax rises. Elsewhere in the Sunday Times there were calls for aid for employment, with the Item Club predictions for unemployment grim – 900,000 job losses this year and 500,000 next bringing the unemployment total to 3.4 million by the end of 2010.

The Sunday Telegraph had columns and columns of commentators punting on what the Budget might bring, but the consensus appeared to be that the Budget would be largely tax neutral for the forthcoming year, but would be followed by some pretty dreadful Budgets needed to bring the nation’s finances back towards solvency. Not reported elsewhere but highlighted in the Sunday Telegraph Business supplement was the expected announcement that various state owned assets would be sold off in a cash generation exercise, with existing plans accelerated to realise cash in the shorter term. The Royal Mint, Met Office and British Waterways property holdings were all suggested as likely to generate “cash in the attic” but the same paper also reported that the sale of the current Student Debt loan book has virtually stalled, leaving the Treasury short of much needed cash. Predictably, Mark Kleinman, the City Editor described the plans as “ill conceived sell offs at rock bottom prices” and favoured instead the Government “addressing the continuing scandal of public sector profligacy”.

And what from the not-so heavyweights? The Sunday Express carried headlines warning middle England to brace itself for “a tax bombshell” but then suggested that the effect of any tax rises would be delayed until after the next election – so the bracing would be perhaps a little premature? The paper quoted a recent announcement by the Institute for Fiscal Studies that the average family would have to pay around £1,250 a year more in tax to “clean up the mess left by Labour’s handling of the public finances”. Not much doubt which way this paper is leaning, then. The paper also repeated its Saturday headline that the pensions of higher rate taxpayers were expected to be hit – allocating a return of up to £7 billion from such a measure. The reference is to indications from Mr Brown last week that tax relief on pension premiums could be restricted to basic rate only.

The Mail on Sunday carried Vince Cable’s “Budget to revive Britain’s ailing economy” in which the Lib Dem economic heavyweight set out what he would include in the Budget – with much talk of reducing taxes for those on low incomes and more help for pensioners. Paid for by clamping down on tax dodgers and abolishing quangos in favour of expenditure on public projects. He is against the widely trailed grant towards new green cars, indicating that he would spend the money on “British built buses”, and would stop the VAT cut in its tracks, spending the “remaining £8.5 billion” on affordable housing.

So what are your predictions and wish list? There is quite a head of steam behind the campaign to increase the VAT threshold to £100,000 – and if that comes off Mark Lee who spoofed the announcement in an April Fool’s joke on business associates – deserves a big pat on the back from small businesses. There is a slight possibility that the Chancellor might accelerate the tax rise (to 45%) on income over £150,000 and bring it in this year (although I am not sure whether this is technically possible). I would tip VAT to go up to more than 17.5% when it next moves – although I expect that to be 1 January 2010. Beyond that, I pretty much agree with most of the serious comment in the press, I think it’s a bit of a “deck chairs on the Titanic” moment this year. Move ‘em around a bit and make it look a bit different, but don’t look over the side – it’s not a pretty sight!

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Mark Lee headshot 2023
By Mark Lee
22nd Apr 2009 09:58

"consensus appeared to be that the Budget would be largely tax n
No surprise there.
2009/10 allowances and rates were announced last year.
Self assessment payment regime means any tax changes announced today can't impact self employed until 2012 (twelve). Any tax changes would first apply re 2010/11 and only balancing liability would be affected - due 31/1/2012.

(Just seen your final para. Thanks for that, but it won't happen)

Mark Lee
Tax Advice Network

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By mikewhit
20th Apr 2009 18:19

It'll never happen
CPI/RPI indexing of tax bands/allowances ... especially mileage - since that is based on fuel costs from 2003 !
;-)

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Rebecca Benneyworth profile image
By Rebecca Benneyworth
20th Apr 2009 22:02

Sadly..

though we have been promised "indexation" of the car fuel benefit scale charge this year - based on what I'm not sure, RPI, CPI or the price of fuel (which would mean it would go donw not up!)

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