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  1. Wealth
March 22, 2011

Budget 2011: Liveblog

By Spear's

We will be liveblogging the 2011 Budget from Chancellor George Osborne from 12 noon on 23 March. Check back here for live updates and expert analysis from wealth managers and the Spear’s team. I will also be tweeting at

We will be liveblogging the 2011 Budget from Chancellor George Osborne from 12 noon on 23 March. Check back here for live updates and expert analysis from wealth managers and the Spear’s team. I will also be tweeting at My colleague Sophie McBain will also be sending in her thoughts and we’ll bring you content from Spear’s sister publications, the New Statesman and Charity Insight.

Highlights/lowlights: banking levy increased, corporation tax down by 2%, NI and income tax merged, non-dom levy going up to £50,000 for those here over 12 years + statutory residence test, IHT relief for charitable legacies, lifetime loans to avoid income tax to be banned, private jets to be taxed.

Click here for expert reaction and analysis

Budget over, Red Book reading begins. Osborne trying to bury bad news of growth decrease in some giveaways and banker-bashing.

Fair fuel stabiliser: 20% to 32% increase on North Sea oil duty, allowing duty rise to be delayed by a year. Fuel duty escalator (extra penny on inflation) cancelled for rest of Parliament. If price falls below $75, escalator reintroduced and oil duty decreased. Fuel duty cut by 1p per litre – that’s the giveaway. Parlous compared to Brown’s giveaways. Oh.

Duties: Air Passenger Duty: no per plane tax – illegal internationally. Private jets to be taxed – we’ve heard about this. Alcohol duty going up as planned, cigarettes 2% above inflation.

Income tax starts £1,000 later – £160 extra – already but now £630 extra in allowance next year. All taxpayers – not just lower bands – getting this.

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From Sophie: ‘Top income earners were told that the 50p top tax rate was a ‘temporary’ measure, but Osborne didn’t mention when this would go. This was an artful, if empty political gesture. The Tories will be pleased to hear that the 50p tax rate isn’t here to stay forever, but given public anger at sluggish growth, high unemployment, and swingeing cuts, it’s unlikely to go any time soon.’

Tax avoidance and evasion: £14bn lost in 2008. Three forms of stamp duty avoidance abolished. CG rules for companies tightened. Lifetime loans to employees to avoid income tax to be banned. £3bn raised. That will hurt bankers and financial service employees a lot.

Philanthropic reform: GiftAid to be simplified – online system. HNWs to be encouraged to give more – but no details at all. Encourage works of art to be donated for tax deduction. Inheritance tax: 10% or more of estate left to charity, 10% taken off IHT. But most HNWs don’t pay IHT, if they’re structure properly. ‘Big help for the Big Society.’

Single-tier state pension, but will take years.

Osborne sounds croaky. Have some whisky. I could never be Chancellor – I’d have to have a very non-serious gin and tonic.

Pensions reforms – age qualification to increase by automatic mechanism. Given that the state pension age of 65 was set after WW2, and we now live till about 85, this has been coming for a while.

On non-Budget news, we’re hearing that Elizabeth Taylor has died. Cat on a Hot Tin Roof one of my favourite films. Coincidentally, not one of George Osborne’s.

Green measures. Wake me up when they’re over. Get to the tax avoidance and evasion measures.

Water-bill relief for SW – securing Lib Dem votes?

Boris to choose an Enterprise Zone in London.

21 new Enterprise Zones with tech advantages and local authorities retaining profits. One in Sheffield, with a nod to Nick Clegg, who still suffered a question in today’s PMQs about cancelling the loan for Sheffield Forgemasters. Will be carved on his tombstone.

There is not a lot to gladden the heart of HNWs on first sight, especially in Osborne’s tone: EIS has increased and so has entrepreneurs’ relief, but the 50p tax rate stays and the banking levy is going up, not even subtly but with a sneer of punishment. Osborne knows which targets are unpopular, but how is he going to cosy up to bankers – Tory backers – after this?

50% income tax a temporary measure, but not being removed yet. HMRC to investigate how much it raises – does this presage a swift removal under cover of research?

‘Redoubling efforts to ensure owners of high-value property don’t avoid paying their fair share.’ What does this mean?

Non-dom levy going up to £50,000 for those here over 12 years – £200m. But removing the tax charge for foreign income remitted to UK for investing in new businesses. No more non-dom changes this Parliament. Statutory residence test.

Enterprise Investment Scheme income tax relief up to 30% from 20%, size of investible company increased, limit raised by 400%.

Entrepeneurs’ relief doubled to £10m.

More territorial rules for foreign-controlled companies to attract overseas business. Corporation tax being reduced by 2% in April instead of 1% and then down to 23%. Lowest in the G7 and some despatch-box thumping.

Bank levy rate being adjusted to offset corporation tax cut – will massively upset banks. Charges of banker-bashing by the bankers will stick, but this may make Osborne and the Tories more popular.

Merging income tax and national insurance! Lawson rejected this in the Eighties as ‘an elephant trap’. Osborne says it will take years to complete.

Community Investment Tax relief retained. From April 2012, direct tax will be uprated by CPI.

Sixth highest corporation tax. ‘From Adam Smith to Nigel Lawson people have set out the principles for good taxation.’ Never thought Thatcher’s Chancellor would reach the esteemed status of Adam Smith!

‘Want City to remain world’s leading centre for finance’, but all other industries in rest of the country have to increase. Does this mean the Chancellor will ease off the banks? Competitive tax system, easy to start a business, encourage exports and investment and improve education to achieve this.

Deficit: £146bn 2010-11, £122bn 2011-12, £112bn 2012-13, £70bn 2013-14, £46bn 2014-15, £29bn 2015-16. The deficit will only be £3bn lower than forecast, meaning there’ll be little for

Structural deficit to remain the same.

Deficit: 60% 2010-11, 71% 2011-12, 69% 2015-16. These figures are similar to last year’s.

Start buying foreign currency again, and dig at Brown for selling the gold at its low point.

OBR expects 4-5% inflation
all the rest of this year – going to be hard on most people, and HNW inflation tends to be double this.

OBR on growth: 1.7% 2010-11, 2.5% 2011-12, 2.9% 2012-13, 2.9% 2013-14, 2.8% 2014-15.

Growth down from 2.1% to 1.7% this year after weak fourth quarter 2010.

‘Fix the Budget to fit the figures’, not vice versa.

Our bond costs have fallen to almost German levels with Spanish levels of debt. Plan for Growth to be published – the main criticism of Osborne has been a lack of a plan, and it sounds like supply-side reforms will be coming.

No more from the British people – no tax rises – but no giveaway. ‘Fiscally neutral.’ Presumably this doesn’t mean no little presents or punishments. </p>

‘Paying for the mistakes of the past’ in 2010 Budget. Oil and high cost of living to be tackled. ‘Route from rescue to reform, and from reform to recovery’ – nice alliteration.

Deputy Speaker takes the chair.

Cameron is citing how awful British banks were under Labour, simultaneously rubbishing other countries (we were worse than Chad! Libya! Serbia!). Diplomacy not for him.

Cameron has faced questions on the NHS, military bases and sex-trafficking from Denis Macshane. (Not sex-trafficking from Denis Macshane, obviously.)

Ah, a banking question: why is poor performance being rewarded with huge salaries? Cameron says they’ve introduced a banking levy and they’re being made to pay more for social causes.

Are the MPs extra-raucous today? It’s not like they’re going to have much to cheer about (on either side): there is little money to offer as giveaways and Osborne will be hated by his own side if he soaks the rich too much.

Welcome to the Spear’s 2011 Budget liveblog, where we’ll focus on the macro-economic data and predictions and topics relevant to Spear’s HNW readers. We’re just watching PMQs – Fukushima, Libya, ‘prostrate cancer’ (David Amess) – and the Tories are wearing plenty of bright blue.

A reminder of June 2010 deficit and growth projections:

Deficit: £149bn 2010-11, £116bn 2011-12, £89bn 2012-13, £60bn 2013-14, £37bn 2014-15, £20bn 2015-16.

Deficit percentage: 10.1% now 1.1% in 2015-16.

Deficit: 62% 2012-13, 70% 2013-14, 69% 2014-15, 60% 2015-16.

OBR on growth: 2.1% 2010-11, 2.3% 2011-12, 2.8% 2012-13, 2.9% 2013-14, 2.7% 2014-15 and 2015-16.

Given the 0.6% contraction in Q4 2010, it’s hard to see 1.2% growth this year, and given the ‘bad’ inflation of 4.4% and the 1% fall in February tax revenues, the projected deficit of £149bn will not be undershot by the £10bn we were expecting.

Some morning predictions (based on heavy hints from the Chancellor, in the main), possibilities and improbabilities:

Private jet duty introduced: This will be a bee’s sting in the scheme of things, hardly raising a real sum, but it shows that ‘we’re all in it together’ slash ‘the rich aren’t safe from a Tory Chancellor’. Real man of the people, that George.

Income tax to remain at 50%: Given the parlous state of the public finances, Osborne’s expressed intention to abolish the new top rate of income tax will have to wait.

Tax haven crackdown to continue: There’s nothing quite like squeezing offshore financial centres until all the juice has run out and you’re down to the pith. Expect more in this trend.

Inheritance tax threshold remains: The Tories stole a march on Labour in 2007, ruining Brown’s plans for an early election, by promising to raise the threshold to £1 million. Despite the relatively small number of people affected by this, it spooked Brown and won the Tories some fans, but it hasn’t been mentioned since. Unlikely in this climate.

Abolition of non-dom status?: Sophie Dworetzsky of Withers suggests this: ‘We believe that if any change is forthcoming, it is likely to take the form of a change in the application of the remittance basis charge and/or reform of the deemed domicile rules. We may see a system where all non-doms – rather than just those who have been resident for over seven years – would be subject to the annual £30,000 charge if they elect to be taxed on the remittance basis. It is also possible that under a new regime all long-term residents of the UK would be taxed as UK domiciliaries. This is already the case for inheritance tax (after 17 years of residence) and could be extended to income and gains tax.”

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