A Budget To Die For?
There has been more analysis of Alastair Darling's latest budget than I care to examine in-depth. I do not usually comment on economic affairs, but thought I would put my ten pence worth in here...These are extraordinary times, and to expect an extraordinary budget would have been perhaps asking too much. The Chancellor had little room to manoeuvre - falling markets, nothing left in the government coffers, and a need to support Britain in getting back on its feet. What he seems to have done is produced a budget that sort of encourages businesses, but disincentivises those who run them. I am focussing here on the proposed tax increases and allowance removals/decreases for those earning over GBP150,000 and GBP100,000 a year. Whilst hitting these would appeal to the majority (and indeed, the Times Populus Poll already suggests that this is the case), does the Chancellor really want to antagonise those who will (one hopes) drive Britain's recovery? He annouced an increase from 40% to 45% only last November, and now he has lumped another 5% on top within six months. This is going to produce a lot of uncertainty for our entrepreneurs and those who might have invested in/moved to Britain - is this a wise idea at this critical time? William Rees-Mogg doesn't think so...
Whatever the Chancellor thinks he will get in increased tax revenues from high earners, this will not happen. They will either leave, or re-structure their compensation. As for reducing allowances on their pension contributions, this seems to be a way of taxing those who save for their retirement (when they will then spend it!).
As for those who were looking to invest in Britain, they will now be turned off until at least the next general election.
Of course, the higher taxes appeal to the vast majority - only the top 1% of earners will pay them, so this is a cheap and populist way of garnering support. As businesses and/or wealth-creators relocate and take jobs with them, will people be so pleased?
We needed a budget to help us get out of recession. This needed to include support for businesses, wealth creators and cuts in some of our highly unnecessary public spending. We have support for businesses and cuts in public spending, but those who drive the future are being penalised in the name of short-term populism. Let's hope that they can re-structure their own packages to keep themselves where we need them!
Labels: Financial
posted by William Martin @ 17:19
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