Mindful Money’s pre-budget round-up
- 21 March 2012
Here is a round-up of what to expect:
According to the Daily Telegraph, the figure to watch out for is £125bn – The OBR may revise down its £127bn deficit forecast but Osborne is expected to bank the gain.
Growth The Office for Budget Responsibility (OBR) slashed its forecasts – saying that the economy being 3.5% smaller than previously predicted by 2016. But there may be good news today, with growth being revised up from 0.7% to 0.8%.
National debt The Office for National Statistics (ONS) has revealed that the national debt has risen back above £1 trillion in the morning.
Budget deficit Government borrowing for the year to April is expected to be a little lower than the £127bn forecast and next year's figures will be about £30bn better than expected.
Spending and taxes: Planned austerity amounts to £147bn over seven years, although there may be some further movement in tax rises and spending cuts.
Shiv Aror tweets : What I love most about #Budget Day: People who read that morning's papers and then act like they're economists. People who don't know ABCD of economics will become pundits today.
Figure to watch out for, according to the Daily Telegraph: £9,000 – A rise in the personal allowance by £895 next year could be the big giveaway for families.
Income tax The Chancellor is expected to cut the top rate to 45p from next year, claiming the move would be revenue neutral as fewer people would avoid it.
David Laws, the Lib Dem former chief secretary to the Treasury, was on BBC News defending the decision to get rid of the 50p top rate of tax.
To those people who are concerned about anything that happens on the 50p rate I'd say this: the problem when Labour introduced 50p is that they introduced it into a tax system that was riddled with loopholes in ways for the rich to avoid tax, and I suspect we will find today the 50p rate has not been making anything like the contribution that the Labour government said it would make. If the Chancellor was to find other ways of taxing very wealthy people and raising more money from those people, that is surely the right thing to do.
Meanwhile, Azad Zangana, European economist at Schroders, says: "The Chancellor's coalition partners are pushing for a greater rise in the threshold for the standard rate of income tax, while his own supporters would like to see the 50% top rate of tax removed.
"Predictably, government bond investors and the sovereign debt rating agencies would like the Chancellor to pocket the unexpected windfall, having recently warned that any slippage would lead to the UK losing its coveted ‘AAA' sovereign debt rating."
Personal allowance The tax-free threshold is expected to be raised from £8,105 to £9,000 next year at a cost of about £3bn.
A tweet from Ed Miliband: Chancellor must ensure every penny he can raise from those at the top is spent on helping ordinary families struggling to get by #budget
Stamp duty The Chancellor is almost certain to crack down on the use of foreign companies to buy UK residential property, a wheeze that lets buyers off stamp duty. A new top rate of 6pc could also be imposed on properties worth more than £2m. The measures could raise about £500m.
‘Tycoon tax' The Liberal Democrats will have scored a victory if a new minimum rate of tax of about 20pc is imposed on the super-rich, to limit the scope of their tax planning.
Martin Pantling tweets: Hoping for a #Budget that will bring '00000s more out of tax, reduce tax on workers on low incomes, and hit tax avoiders like T Blair hard.
Council tax A new top rate of council tax could be brought in on high-value homes.
Pensions The pension tax relief threshold, currently on annual contributions of up to £50,000, could be cut.
Corporation tax The Chancellor has already set out a timetable to get it down to 23pc. He could reveal plans to reduce it to 20pc at a cost of about £3bn.
National Insurance Employers may be given a year's National Insurance holiday for every employee aged under 25 hired in an effort to boost youth employment.
Seed capital Tax reliefs for angel investors could be extended from equity to debt.
Fuel duty Due to rise by 3p per litre in August.
Shaun Richards, Mindful Money's economist blogger , says: "The day started badly for the UK economy with the UK Public Sector Borrowing Requirement in February not only exceeding forecasts but also being much worse than last year's number.
"Whilst there was a fall in tax receipts of £1.2 billion the main cause was an inability to control spending. Central government spending rose from £48.5 billion in February 2011 to £52.5 billion this year."
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