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The truths they don't want you to read....

Tuesday, June 22, 2010

The budget overall

A fairly reasonable and sensible mix of policies. Some better IMHO that others, but the key ones that jump out are:

Freezing public sector pay: Will not be popular in the public sector, but well trailed and almost expected, if not accepted.
Reducing WTFC income eligibility levels: Sensible cost-saving exercise. Surprised that the limited not reduced further. Next year perhaps?
Reduction in Corporate Tax rates: How on earth can that be afforded?
VAT up to 20%: Inevitable to fill the black hole. I suppose it makes the computations easier (!)
NIC exemption for new business: I sense a huge loophole opening up here....bring me the detail, quick.
No new sin taxes: A surprise, but I suspect it is purely political to offset the pain elsewhere.
CGT rate up to 28% for Higher Rate taxpayers: Sensible and income generating, but still leaves huge loopholes, if you have a good accountant!
£1,000 increase in Personal Allowance: Excellent move which will mitigate the pain for the lowest earners, but very expensive.

Summary: I can see most of the give aways, and some of the increases, but they don't really balance out to a huge increase in taxation. I didn't see the Public Spending detail, and I suspect a lot of the pain is going to be hidden in the fine detail which will be perused over the next week.

Better and fairer than I thought, possibly due to the LibDems influence, but what have I missed?

Harman has started speaking, so time to switch off.....


Flirty Gerty said...

I think the timing of the VAT rise is crucial (Jan 2011). He is - I think correctly - assuming that people will buy big-ticket items before the calendar year-end to avoid extra VAT.

This will provide an enormous cashflow boost to everything in the VAT-able sector and provide a big profits surge which prudent companies will use to ride out next year's difficulties.

It's like the last Government's stimulus package to replace old cars, only without the outlay. It's clever - and no matter what you think of them, you have to admire it.

It also makes working out VAT much easier for those of us with little financial brain. I know Angus can work out 17.5% in his head, but I can't.

Anonymous said...

Yes, how considerate of the Tories (whose PM admitted last month that VAT was a most regressive form of taxation), and the Lib Dems (who told us to avoid the Tory VAT bombshell), to raise taxation to help you with your mental arithmetic. Now, figure out for me why the Tories would work up a wheeze whereby the incoming 2.5% VAT increase will provide "an enormous cashflow boost" in the interim, when they condemned the previous temporary 2.5% VAT reduction as completely ineffective. Clever, clever, FG, but not so smart for those on the lowest incomes. ....same old Tories. Just look at what the Institute of Fiscal studies has to say today about whether the budget is sharing the pain across the poor and the rich; not on your life, of course.

Anonymous said...

its very simple tenpercent plus five per cent plus two and a half percent. half it each time !

Flirty Gerty said...

@2.27pm yes, but by the time I've worked out the second percentage I've forgotten the first one.

I'm the last to defend the Tories but VAT at least has the merit of being a partly-avoidable tax (i.e. many essentials are still zero-rated).

Something has to be done to deal with public finances. The options are few and Osborne (or rather his advisors) has played a more skilled hand than I thought he was capable of, and he has managed to create a minor economic stimulus package without an upfront outlay (the car scrappage scheme returned a net profit to the Treasury but was still expensive).

Same old Tories? Definitely. It's like being ruled by the Daleks or the Borg - you know exactly what you're going to get. But whoever was in power would have to do something similar or we'll come over all Greece or Spain - and I'm old enough to remember what happened to our economy the last time the IMF intervened.