Budget and the forecasts
This morning, in a webcast, Accountancy Age readers were asked if they felt more confident about the economy after the Budget. 60% said no, quite bluntly.
The interesting thing is that I don’t think you can feel worse. It was in fact a “no change yet” affair which promised to deal with the Budget deficit, but as yet held back from offering a detailed plan on how to do it.
We should not be surprised by this. With a General Election looming Darling was unlikely to do anything that would risk making Labour a hostage to fortune.
His underlying justification though is that cuts, or tax rises, now are too soon. Indeed, public spending is still expected to rise before any planned cuts happen.
Plus he wants to wait to see how tax revenues turn out.
In the red book there are some interesting figures that give us a clue that Darling believes more money is due to come in.
Yesterday, he told us that the forecast deficit of £178bn for 2009/10 would be actually be £167bn. the Budget also revealed he expects tax receipts for the year to rise from a forecast £498bn to £507bn. More interestingly he expect receipts in 2010/11 to be £550bn, £10bn more than was forecast in the December pre Budget report.
He is feeling optimistic about the economy and tax revenues it can generate.
Most of the uplift is expected to come from more income tax (the new 50% band and banker’s tax) a fall in the value tax credits being handed out and more corporation tax.
Will he get it though? Will the predictions pan out?
If we are expecting more efficiency in the public sector then Darling must believe the private sector will generate more jobs and profits to boost revenues.
Would his measures in this Budget do that?
Business benefited to the tune of around £2bn in Budget measures but these were restricted mostly to SMEs. There was little or nothing to help big business – the multi nationals.
A panel experts brought together for Accountancy Age believe that the Budget was very much about what was not done.
They still expect a big hike in capital gains tax, possibly to 25%, and a rise in VAT to at least 20%.
Darling’s deficit targets could well be supported by the unarticulated intention to raise these key taxes after the election. For that matter, the other parties will have to think about them too.