Daily Archives: April 22, 2009

Jim Pickard

The new 50p top rate of income tax is hugely significant. 

Jim Pickard

It is a gift for the Tories. And the timing is bizarre.

The International Monetary Fund has made its global economic predictions and the results aren’t too pretty for the UK. 

Two thoughts on the politics of the 50 per cent tax rate.

1) Alistair Darling has given the Tories a ticket out of tax raising jail  

There is a grim chart on page p36 of the Budget showing national debt “on a declining path”.

Unfortunately it only goes up to 2020, so it is impossible to see exactly when the Treasury expect the debt to return to 40 per cent of national income. I’ve made my own clumsy attempt (see below) which sheds little light on the matter, other than to show that it will take a very long time indeed. 

Jim Pickard

It was only a small promise but gives some insight into how the government works.

Darling promised £50m on housing for the armed forces, with a grandiose pledge: 

The Budget scorecard (see p10) is far from clear in outlining the full extent of the raid on high earners. But the footnotes give a rough guide to how much extra the exchequer will be collection from people earning more than £100,000.

In 2012/13 the Treasury expects to be collecting about £7bn a year. Most of that is from people earning more than £150,000. About £1.5bn comes from the removal of the personal allowance, £2.4bn from the new 50 per cent rate, and £3.1bn from cutting tax relief for pensions contributions. 

Jim Pickard

Being leader of the opposition on this Budget Day was like shooting fish in a barrel.

The forecasts didn’t predict a U-shaped recovery but a “trampoline recovery”, said David Cameron.

Predictions from the November PBR of a 1 per cent fall in GDP (it’s now 3.5 per cent) had turned out to be “utterly useless” and a “work of fiction”. 

Jim Pickard

Counting the same number twice is very New Labour.

So far I’ve spotted one example already in today’s Budget. 

Jim Pickard

You can see how much of a squeeze the government is in by looking at the figures for its tax receipts.

Projections for 2009/10 are: 

Jim Pickard

If you want to take away two main points from today’s Budget they are these:

1] Borrowing is about to go through the roof. The figure for public sector net borrowing (PSNB) was just 2.4 per cent in 2007/8. It will have jumped to a punitive 12.4 per cent this year, before easing back to 11.9 per cent, 9.1 per cent, 7.2 per cent and (by 2013-14) 5. 5 per cent. 

Jim Pickard

The FT revealed on Tuesday that Darling would have to issue more than £200bn of government bonds this financial year, far above market expectations.

With public borrowing set to soar to £170bn-£180bn, the chancellor will have to tap the market for an issuance of gilts that will be well over £50bn higher than the Debt Management Office estimated last month,” we wrote. 

Jim Pickard

As David Cameron points out, there is an admission on page 200 of the Budget red book: “The current downturn is forecast to be much deeper than that of the early 1990s.”

Doesn’t this make a nonsense of Gordon Brown’s constant claim that things were much worse in the early 1990s when interest rates and inflation were in the double-digits?