UK Budget

Lucy Warwick-Ching

The Treasury has confirmed that the newly appointed Chancellor George Osborne will present his emergency Budget on Tuesday 22 June, less than six weeks away after the new government has taken power.

Although a number of the government’s flagship tax policies were revealed in the Coalition Agreement there are many difficult choices that have yet to be made, for example whether or not VAT will rise. Entrepreneurs will also be eagerly awaiting details of the proposed increases in capital gains tax and the proposed reliefs.

Lucy Warwick-Ching

It’s Budget week and all eyes are on chancellor Alistair Darling, who needs to pull a metaphorical rabbit out of his red case.

While my email inbox is stuffed full of releases outlining potential measures that may or may not appear in the statement, this morning I received something a little more interesting from Dr Stephen Barber, a leading economist, who advises Selftrade. He says:

With the prime minister poised to go to the Palace, there hasn’t been a Budget quite as politically sensitive as this one for eighteen years. Then it was the ill fated Norman Lamont whose politically clever but economically irresponsible Budget helped John Major’s conservatives win the 1992 general election against the odds. We have to go back to more than 20 more years to find similar circumstances ahead of an election. Here, the great Roy Jenkins, then a Labour chancellor taking over from Callaghan following devaluation, delivered a Budget which was the height of economic responsibility. But his party lost office unexpectedly in the 1970 election. 

Lucy Warwick-Ching

After much speculation on the date of this year’s Budget, Gordon Brown has finally confirmed that the Budget will be delivered in two weeks time on 24 March, fuelling speculation that there will be a general election on 6 May.

The forthcoming Election will have an affect on what’s in the Budget of course, and there are many that would argue that the first 2010 Budget will be largely forgotten about, but it shouldn’t be ignored entirely.

Accountants Grant Thornton have come up a list of 10 Budget predictions:

1. More measures to reduce unemployment
It is expected that further measures will be taken to help both 18-24 year olds and the long-term unemployed back into the work force to help rebuild the economy. It remains to be seen whether any jobs created under the current government schemes will be real, sustainable jobs, or if we are simply returning to the days of previous recessions where there were a multiplicity of ‘schemes’ for young people, few of which led to lasting employment.

2. VAT to remain at 17.5%
We expect VAT to be left alone in this Budget. However, there is no doubt that any new Government of whatever political persuasion will consider that our comparatively low standard rate may need to be increased in the near future to reduce the spending deficit.

Matthew Vincent

The gap just keeps getting wider! No, not the gap between rich and poor – some of today’s National Insurance and income tax allowance measures for high earners will help to close that (not to mention the bank payroll tax). And not the gap between private and private sector pensions – measures to cap public sector employer contributions should make them less outrageously advantageous (although pension campaigner Dr Ros Altmann points out that the cost of public sector pensions will still rise by 45 per cent next year, cap or no cap!).

I refer to the yawning gap between income tax and capital gains tax (CGT).

Income tax for high earners will hit 50 per cent from next April, and today we learned that National Insurance on earnings above £43,000 is going up to 2 per cent from April 2011, not 1.5 per cent as previously announced. That’s a marginal rate of 52 per cent in 18 months’ time (National Insurance is nothing but income tax in a fluffy disguise). But capital gains tax was left completely unchanged in the pre-Budget report, at a flat rate of 18 per cent – contrary to many predictions.

That’s a gap of 34 percentage points – the widest in living memory (well, my memory, at least).

But before you try the – theoretically legal – wrapping up of profits in a company structure to take earned income as a capital gain, bear in mind that the Transaction & Securities legislation is coming. Consultation on anti-avoidance measures closed on October 31, but don’t be lulled into thinking that the chancellor forgot about it in today’s statement.

Although he had time to announce measures today, HM Revenue & Customs says he’s waiting until Budget 2010. If there isn’t an election before he gets to deliver one…

Lucy Warwick-Ching

Contrary to city rumours, which had the date down as December 2nd, the Chancellor has announced that his much-anticipated Pre-Budget Report will be delivered on 9th December.

Alistair Darling is widely expected to either extend the hikes we are already expecting, or introduce new tax raising measures. He is not likely to be able to provide many treats. However, there are a few measures that could help assist the economy and potentiall encourage a return to growth.

The FT’s Money blog is a forum for the latest news and insights from the UK’s personal finance scene. Matthew Vincent, the editor of FT Money and his team of reporters will upload their views and insights on what’s happening in the industry and how this affects people’s finances.

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Lucy Warwick-Ching is the FT’s new Money Online Editor and has been a UK Companies reporter covering tobacco, pubs and leisure companies as well as the deputy editor on House and Home.

Matthew Vincent is the FT’s Personal Finance Editor and was previously the editor of Investors Chronicle, where he also devised the award-winning online video The Market Programme, and produced the BBC-FT standalone magazine ‘How to be Better Off’. He presents the weekly FT Money Show audio podcast, and previously worked on the BBC TV programmes Short Change and Pound for Pound.

Alice Ross is deputy personal finance editor of FT Money. She specialises in pensions, investments and investment trusts. Alice joined FT Money in April 2008 - prior to that she was deputy editor at Money Management magazine.

Ellen Kelleher has been a personal finance reporter in the UK for close to four years. Before arriving in London, she worked in the FT's New York bureau where she covered the insurance sector.

Steve Lodge is a personal finance reporter on FT Money specialising in savings.

Josephine Cumbo has written about all aspects of personal finance but currently specialises in insurance. She also covered company news for Prior to working at the FT she was a news reporter for the ABC.

Tanya Powley is a personal finance reporter on FT Money specialising in mortgages and the housing market. Tanya joined FT Money in November 2009 after working in Australia covering personal finance for the Australian Financial Review and its sister magazine Asset. Prior to that, Tanya wrote about mortgages for UK trade newspaper Money Marketing.

Jonathan Eley is editor of Investors Chronicle, and has been with the title for ten years. Before that he worked for newswires and trade journals in London, New York and Hong Kong.