March 12, 2008
The budget assumptions
Here is are some snippets from the budget documents. I’ll start with the bad news.
- Falling share prices will hit capital gains receipts in 2009 by an undisclosed amount. Inheritance tax receipts are also likely to be “adversely effected”
- Stamp duties are expected to be £800m below forecast because of weakness in the housing sector. In 2008-09, receipts are expected to fall by 6 per cent as the country goes through a period of “sluggish or flat house price growth”
- They expect a further “near-term” decline in commercial property prices (which have already fallen by more than 10 per cent in the last year)
- Investment in homebuilding is expected to be flat in 2008
- The Treasury are able to write an entire box on Financial Sector Performance without once mentioning Northern Rock
And here’s the good news (if you believe the Treasury)
- The budget forecasts are based on the assumption that the credit squeeze will ease in the second half of this year and “normalise” by the middle of 2009
- Don’t panic, there is a rebound coming: “With the economy picking up in 2009 as financial markets normalise, a rebound in residential transactions and an upturn in commercial property is projected.”
- And who said falling property prices would hit consumption? “Strong recent labour market performance means that conditions are in place for house prices to slow without a significant negative impact on consumption.”
