Highlights/lowlights: 7% stamp duty on ’2m houses, 45p rate from 50p, General Anti-Avoidance Rule to be introduced.
Highlights/lowlights: 7% stamp duty on £2m houses, 45p rate from 50p, General Anti-Avoidance Rule to be introduced.
Ed Miliband frames this as a Budget for millionaires, saying hardly any taxpayers except the very wealthiest will benefit. Those earning over £1m will have an effective tax cut of £40,000, he says. 'The government's very own banker's bonus.'
Sophie McBain: According to Stephanie Flanders, BBC economics editor, one in three adults don’t pay income tax now. Ed Miliband clearly isn’t convinced by the OBR’s prediction that the rich will pay five times as much.
George Osborne has sat down, Ed Miliband has stood up. We'll find out all through the afternoon what this means for Spear's readers and which devilish details have been hidden in the Red Book.
Largest ever increase in the personal allowance – £1,100 from next April – to £9,205 before any tax.
Sophie McBain: The increase in the threshold for personal tax allowance may be the one issue that almost everyone can agree on.
Richest to pay five times more tax than with 50p rate, says OBR.
Sophie McBain: Five times more money from the rich!? Let’s see whether these OBR forecasts are met. The 50p tax rate, after all, raised much less than expected, does the Treasury have a tendency to be over-optimistic when it comes to tax receipts from the wealthy?
50P TAX RATE: £16bn of income shifted into previous year at a cost of £1bn. Self-assessment receipts below forecast by £3.6bn. 50p rate raised a third of £3bn.
HMRC says 50p raises 'a fraction', so top rate of tax going to 45p from next April.
Sophie McBain: It’s interesting to note how Osborne justified reducing the 50p tax rate. He had two options, either he could simply say that it didn’t raise as much as expected, or he could say that the 45p tax rate will raise more.
By saying the latter he removes some of the pressure to raise funds elsewhere – although most voters will still want to see the rich taxed in other ways. We know the tax raised much less than expected, but it would be interesting to know how much money was lost because of the ‘negative advert’ it sent out about the UK.
Last week, Stephen Lewin of Bircham Dyson Bell said that he believe that Osborne would reduce the rate to 45 per cent to ‘show willing’, ‘although in reality this would make little difference.’ If the economic case stands, should Osborne have pushed the top tax rate even further despite political opposition?
We all know that Ed Balls will be enjoying the opportunity to paint ‘the nasty party’ as kowtowing to the rich. To revisit earlier public opinion polls: A ComRes survey for the Independent on Sunday and the Sunday Mirror said 58% of those polled were against a cut, with 21% in favour. The majority of Conservative voters polled (51%) were also against, but the most hostile were Liberal Democrats, 70% of whom said they wanted the 50p rate to stay.
7% stamp duty on houses over £2m, as trailed.
Sophie McBain: Boris Johnson won’t be happy, 81% of homes worth over £2 million are in London. Withers LLP says this will require a wide-scale revaluation of all properties to be fair.
Spear’s heard from Saffery Champness over the practicality of mansion tax: they too noted it would affect London disproportionately, and worried it could cause more of London’s HNWs to relocate. They also flagged up the practical difficulties of classifying certain properties ie. Should a non-commercially viable farm owned as a ‘lifestyle property’ but worth over £2 million be classified as a business or personal property, and how should it be taxed accordingly.
15% stamp duty on houses over £2m bought in corporate envelopes. Consultation on a mansion tax for over £2m. CGT on property held in overseas envelopes. Retrospective action on avoidance: 'People have been warned.'
BIG TAX ANNOUNCEMENTS: Tax evasion and 'aggressive tax avoidance' are 'morally repugnant'. Anti-avoidance measures increase tax by £1bn over next five years, protect £5bn. Cites UK-Swiss tax agreement.
GENERAL ANTI-AVOIDANCE RULE to be introduced.
James Johnston of Bircham Dyson Bell on a GAAR:
“In the field of tax planning there are always a minority who promote aggressive schemes. One way of discouraging this would be to introduce a General Anti-Avoidance Rule (GAAR). However, to my mind a GAAR would create more issues than it resolves.
“A broadly worded anti-avoidance provision would make it difficult for professionals to advise their clients on the effect of entering into any transaction. For genuine commercial transactions, a client needs to know whether or not they will fall within the rule. There therefore needs to be a proper clearance procedure, but the government has indicated that it would be too expensive to implement a separate procedure for the GAAR – if such a rule were implemented without a clearance procedure I would anticipate major problems.
“Furthermore, one would have thought that the compulsory tax disclosure procedures have gone quite a long way to address the issue of aggressive tax avoidance schemes already. The Revenue has been very successful in gathering information about tax schemes and one would question whether a GAAR procedure is required on top of this.”
5% above inflation on cigarettes – 37p.
Competitive tax system: corporation tax due to fall to 25% this April – further cut of 1% right away. Rate will end up at 22%, increasing international competitiveness. Aim to align small corporation tax with corporation tax.
0.015% bank levy increase so banks don't enjoy corporation tax cut.
Sophie McBain: On to the meaty issue of personal tax, the central issue for this year’s budget. We’re seeing a bit of blue, a bit of yellow: perhaps Cameron was right in promising a ‘kaleidoscope budget’ – referencing Bercow’s ‘kaleidoscope Queen’ performance. Incidentally, I notice that Nick Clegg has gone for a bright red tie today – perhaps to distance himself from the reduction in the 50p tax rate about to be anounced.
As trailed, from 2014, taxpayers to receive 'personal tax statement' with NI and income tax, average tax rates and how contributes to public spending.
Sophie McBain: Good that Osborne credited Ispwich MP Ben Gummer for the idea of sending individuals tax statements showing how much they have paid and where it goes. I wonder how much it will cost to do this?
Single-tier pension for new pensioners – currently estimated at £140 a week. 'Single generous basic state pension for those who have worked hard and saved hard all their lives.'
TAX SYSTEM: Small firms to be taxed on basis of cashflow, up to £77,000 – simpler tax returns for up to 3m firms. Integration of Income Tax and National Insurance to continue.
Enterprise loans for young entrepreneurs, analogous to student loans. This could be a very interesting one.
Overhaul of planning regulation to be published. They're keeping the presumption in favour of sustainable development, which Spear's has been campaigning against – this will mean heritage and the countryside are endangered for wind turbines, among other things.
Sophie McBain: NPPF will be published next week, the presumption in favour of development remains, despite Spear’s ‘Save Our Historic Landscape Campaign’ to urge the government to give greater weight to protecting Britain’s famous countryside and heritage. Heritage tourism brings in billions of pounds a year, and this will put some of Britain’s most iconic buildings and landscapes at rich.
90% will have access to broadband. Ultra-fast broadband and wifi for ten big cities – 'that's what a modern industrial policy looks like'.
Michael Heseltine asked to review how business and government work together.
Film tax credit generated £1bn last year – introducing for video game, animation and 'high-end television' production. George wants Disney over here!
Sophie McBain: It’s good to hear that Osborne is trying to back his bold promise to ‘unashamedly back business.’ Export finance, loans for SMEs, and loan guarantees will all be welcomed by credit-hungry businesses. Private investment in the road industry should borrow lessons from the water industry – let’s just hope this isn’t taken too literally or it’ll be impossible to drive from London to Edinburgh.
Enterprise zones are up and running, and Manchester's has been attracting lots of Chinese investment, apparently.
£70m development fund for London to attract businesses.
We were 'seduced by large deficits and the illusion of cheap finance' – are we going to let the BRICs power ahead? Britain in top ten most competitive places, yet exports have shrunk over the past decade – 'the road to Britain's economic irrelevance'. Double exports to £1 trillion over the next decade. London as a new offshore market for the offshore trade in the renminbi – see our article about this. Increasing role of private, foreign and sovereign wealth investment in infrastructure.
The trailed 100-year and perpetual gilts – but who will want them when the last 100-year gilt is now worth 2% of the principal?
Gold reserves up to £11bn – dig at Gordon Brown selling £13bn of gold for £2bn.
Osborne says interest rates low because of debt paid down – or because of low growth expectations?
Less spending because of ending of combat operations in Afghanistan by end of 2014, saving £2.4 billion. Some of the saving (£100m) going to improve army accommodation, doubling rate of council tax release – 100% relief.
Sophie McBain: Last budget’s economic forecast didn’t look very cheery, but it turns out we didn’t even manage those anaemic growth figures. In the last budget, growth was forecast at 2.5% this year. How the times have changed, Osborne’s ‘positive’ news is that we’re not in ‘negative’ growth – and this year the house cheered at the 0.8% figure for 2012. Predictably, Osborne blames Europe and oil prices, and he led with the miserable growth figures forecast for Europe and the rest of the world to prepare his audience.
DEFICIT: 7.6% 2013.
BORROWING FORECASTS: £126bn 2011-12 (£1bn less than forecast), £120bn 2012-13 (ex Royal Mail), £98 2013-14, £75bn 2014-15, £53bn 2015-16, £21bn 2016-17. Structural deficit eliminated by 2016-17, but still two years later than originally planned.
NET DEBT: peak at 76.3% 2013-14.
Government using Royal Mail pension takeover to pay down debt.
2.8% inflation this year, 1.9% next year. QE remaining in place.
Eurozone crisis impact on the UK has been 'serious'. OBR sharply revising down eurozone growth by 0.9% to -0.3%. Oil shock potential too. UK will avoid a technical recession, says OBR, and OBR revising growth up to 0.8% from 0.7% as trailed, 2% 2013, 2.7% 2014, 3% 2015 and 2016.
'A reforming Budget' with 'far-reaching tax reform', 'more competitive for business' than anywhere else in the world, lifting the lowest-paid out of tax and making the wealthy pay more. So far so standard.
Before the George Osborne gets to his feet, a quick reminder of the predicted borrowing figures from the Autumn Statement last year: £127bn 2011-12, £120bn 2012-13, £100bn 2013-14, £79bn 2014-15, £53bn 2015-16, £24bn 2016-17. Given that the February borrowing figures came in today at £15.2 billion, up on last year's £8.8 billion, the likelihood of giveaways seems more remote.
Join Sophie McBain and me here from just before 12.30 for the Budget 2012, delivered by Chancellor of the Exchequer George Osborne. With so much trailed (see our Budget preview here), will there be any surprises for Spear's readers?