Alistair Darling delivered his third budget today. A Budget the press have widely anticipated would be a 'phoney' Budget. In my opinion this is certainly what we got, a Budget that avoided the tough decisions on cost and budget reductions and provided very little stimulus to the economy.
Clearly we will have to wait until after the general election for the second Budget of the year in which the 'tough decisions' will be made to tackle the public deficit. Unfortunately this means that individuals and businesses will have to prepare themselves for a frustrating period of uncertainty as party politics overshadow the needs of the economy.
Surprisingly the Chancellor seemed very proud to announce that 60% of all tax rises will be paid for by the top 5% of earners. Certainly this would appear be an indication of the basis on which Labour will fight the General Election.
However, the announcements on no changes to the main rate of capital gains tax and also the doubling of the Entrepreneurs relief lifetime qualifying gains to £2 million from the current £1 million was a welcome and very surprising announcement. In this regard with a main rate of capital gains tax of 18% compared to a higher rate of income tax of 50% then it is clear that in the forthcoming years there will be a desire to create capital gains rather than taxable income.
We will now consider the press releases and consultation documents that have been issued this afternoon to see what the detail contains but in case you have not yet been able to catch the main announcements coming out of the Budget report we thought we would summarise them for you.
Economic Announcements
· UK economy has contracted by 6% during the recession.
· Borrowing forecast at 11.8% of GDP this year.
· The Chancellor expects UK GDP to grow by between 1% and 1.5% this year and between 3% and 3.5% in 2011.
· The Chancellor confirmed that his time table for cutting the budget deficit by half over the next four years is attainable.
· There was good news that this year's borrowing will be £11bn lower than expected i.e. £167bn rather than forecast £178bn. The forecast in 2011 is a budget deficit of £163bn again lower than the £176bn previously forecast.
· National debt will reach 54% of GDP this year, increasing to 75% in 2014/15, and beginning to fall the year after that.
· The Inflation target set for the Bank of England is unchanged at 2%.
· Government will stick to all spending plans for the next year.
Taxation Announcements
· Taxation on bank bonuses has raised £2bn in taxation double the amount originally forecast.
· Stamp duty threshold to be temporarily increased from £125,000 to £250,000 for first time buyers from midnight tonight but Stamp Duty will increase to 5% on homes worth more than £1,000,000 from April 2011!
· Next month's originally planned 3p increase in fuel duties will now be staged with a rise by 1p in April, followed by a further 1p rise in October and the remainder in January 2011.
· Commitment to continue with the HMRC time to pay arrangements, which is very much welcome to many businesses.
· IHT thresholds to be frozen for the next four years.
· Duty on beer, wine and spirits will increase as planned from midnight on Sunday. Alcohol duties will also increase by 2pc above inflation for two further years from 2013.
· 50% tax rate, reduction in personal allowances for those earning more than £100,000 and restriction on pension relief for higher earners confirmed as coming into effect as planned from April 2010.
· Annual investment capital allowance increased to £100,000 from the current £50,000 for all businesses.
· The Entrepreneurs capital gains tax rate of 10% is extended to £2 million of gains from the current £1 million of gains effective from April 2010.
· No increase in the main rate of CGT , which is a surprise to many commentators and I included.
· Measures to counter tax avoidance and evasion announced and as part of these arrangements new tax information exchange agreements with Grenada, Dominica and Belize akin to the one already signed with Lichtenstein.
Other Announcements and Measures to be Introduced
· Annual ISA limit will rise from £7,200 to £10,200 from next month and limits will increase annually in line with inflation.
· Intention remains to sell shares in Northern Rock, RBS and Lloyds TSB such that taxpayer will make a financial return on the support provided to the banks.
· RBS and Lloyds TSB to be required to provide a total of £94bn of loans and at least 50% of this to be made available to small businesses.
· New credit adjudication service to be introduced for those businesses denied credit by the banks. To me this sounds like a complete white elephant and just adding costs to the system.
· 15% more government contracts to go to small firms.
· Business rates to be cut for one year from October for small businesses.
· £4bn of extra funding to support the forces in Afghanistan.
· The Government is creating the Growth Capital Fund. This will act as a new channel for private sector investment in UK SMEs alongside Government investment. It will provide a new source of finance to growing small and medium businesses that need between £2 million and £10 million of capital for investment and growth. | 
