RegulationCorporate GovernanceThe Budget aftermath: life after Gordon

The Budget aftermath: life after Gordon

As we contemplate Brown's final Budget, our reporters speculate on the future of the British economy

Having just delivered his 11th Budget, Gordon Brown is stepping aside as
chancellor of the Exchequer to move on to his next challenge and quite possibly
the biggest of his career. But where does that leave number 11 Downing Street?

Will he look to appoint a chancellor who will forge ahead with the economic
policies he worked so hard to put in place? Or does this present a massive
opportunity for change, and widespread reform.

We present four scenarios for how things could pan out, and ask what
difference would it make to the political and financial landscape.

Scenario one: business as usual at number 11

Likely chancellor: Alistair Darling

As Gordon Brown moves just a few feet into his new home at number 10,
taxpayers will be licking their lips at the possibility of a new chancellor who
is less focused on gleaning an uncomfortable portion of people’s hard earned
cash into government coffers. Unfortunately, that scenario is very unlikely,
writes Kevin Reed.

It is more probable that Brown will promote cabinet stalwart Alistair Darling
from the somewhat precarious role of trade secretary to chancellor of the
Exchequer. In turn Brown will have someone in place with whom to push his own
tax-aggressive agenda.

Darling served as transport secretary for several years, battling with
upgrading the train infrastructure and pushing a generally unpopular road

The tax community doesn’t believe Darling is picking up a poisoned chalice,
more that the position would be a ‘figurehead’ role without many powers, even
with his proven abilities.

Brown is well known for extending his reach beyond that of a typical
chancellor, influencing policy-making to suit his needs before letting loose the
Treasury’s purse. A new chancellor would do his bidding, and Darling has always
towed the party line.

Tax professionals, therefore, expect to see no change in the current tax
policy in the near future. With HM Revenue & Customs restructuring and
cutting jobs as part of the public sector efficiency regime, there’s little to
no chance that that the taxman’s aggressiveness will ease off – apart from where
the taxman has suggested it will better manage risk around contesting tax
arguments in the courts.

Modernising HMRC’s powers, the project that has led to concerns of HMRC
looking to extend its reach, will no doubt continue in that vein. And whether
you like it or not, Brown will run the show. Better the devil you know, perhaps.

Scenario two: Radical Brown

Possible chancellor: Jack Straw

Gordon Brown’s accession to Prime Minister has in recent years seemed
assured, writes Alex Hawkes.

Alistair Darling stands in line to inherit his throne.That, at least, is the
perceived wisdom. But some are tipping more radical alternatives, and much will
depend on what happens this summer.

What about Jack Straw as an alternative chancellor to Darling, under Brown?
Straw is thought to hold the same line on the Euro as Brown, in being broadly
skeptical, but it’s difficult to say what he thinks on other tax matters. He
lacks the Presbyterian evangelicalism of Brown, but could be expected to push
the same anti-avoidance agenda that has dominated Treasury thinking for years.

As a New Labour architect, he would be unlikely to take the left-wing tack
many are currently flirting with. A 98% income tax rate would remain a thing of
the past. Balls and Brown are set to, in any case, dominate the Treasury. So it
will be business as usual.

On the views of Balls and Brown: ‘You can’t put a cigarette paper between
them,’ says one Westminster watcher. Balls is a former Financial Times
journalist, Brown a university lecturer, but on Europe, business, the US and tax
avoidance they sing from the same song sheet.

The other, more radical alternative, is for a challenge from David Milliband
to materialise. Milliband would be an altogether different leader. The
environment secretary is close to the Blairites. Could we see John Hutton as
chancellor of the exchequer, with other more junior Blairite figures taking the
role of paymaster general? Liam Byrne, James Purnell, Andy Burnham?

Would Brown offer Milliband the chancellor’s job to keep him happy? It’s
unlikely he’d accept it given that Brown and Balls would be breathing over his
neck. But in politics, anything can happen.

Scenario three: Tory election victory

Possible chancellor: George Osborne

If various opinion polls on who will win the next election are to be
believed, then the future of the UK tax system will not be in the in the hands
of another Labour chancellor, cut in the mould of Gordon Brown, but a Tory
right-hand man for David Cameron, writes Nicholas Neveling.

Should Osborne become chancellor, what can taxpayers and advisers expect? One
need look no further than the Tory-sponsored Forsyth Commission, which last year
produced a detailed report on how the UK tax system should be reformed.

Tax simplification has been the main sales pitch, and is likely to be the
first area that Osborne will tackle. Top of the list of priorities will be to
sweep away the numerous perks, allowances and reliefs that have characterised
Brown’s time at the helm.

On the corporate tax front Osborne will look to reduce the corporate tax rate
to 27% and replace the current schedular system with one based on accounting

The Tories are likely to push for the abolition of the indexation allowance,
R&D tax credits and film tax credits to make up for the cut in the headline
rate. Safe harbour rules and a general anti-avoidance rule will be put in place
to protect revenues, and a short-term capital gains tax which tapers to zero
over ten years may replace the current complex system of taper relief and

When it comes to personal tax the Tories are promising similar reforms that
will reduce and simplify taxation. The Forsyth Commission proposed setting the
basic rate of income tax and the savings rate at 20% and abolishing the complex
web of tax free employee benefits and allowances.

Then there are the green taxes, which Cameron has made centre of his campaign
for leadership. Whether he likes or not, Osborne going to have to do something
like increase taxes on air travel or heavy fuel-consuming vehicles. As always,
it is easy to set a blueprint for likely policy. Following how effective and
well received that policy is that will be interesting.

Scenario four: A Hung parliament

Possible chancellor: Vince Cable

If the Tories, or even Labour, do not win the next election outright, the Lib
Dems could be a key figure in any hung parliament. So what do Menzies Campbell
and Vince Cable think about the profession? asks Penny Sukhraj.

One key policy that marks the party out is a pledge to introduce a general
anti-avoidance rule. Cable is also concerned about death taxes affecting the
middle classes. His argument has been that the very rich are quite able to
afford to pay accountants to structure their wealth so as to prevent them paying
the death tax

Whether the party, with either Campbell or Cable as chancellor in a hung
parliament, would be able to push through such moves under a Labour
administration is questionable. A compromise would be most likely, but what kind
of compromise?

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