Tax experts are still speculating on what will be in the chancellor's pre-Budget report but there's a growing feeling that the date for the big announcement is still under wraps because Gordon Brown is struggling to find ways of mitigating bad news.
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‘The only reasons I can see why the date has not been set is that either he has nothing to say or he wants something to hide the bad news behind,’ said Alistair Kendrick, head of tax at Ernst & Young.
Experts are divided over what this bad news will be. Graeme Leach, chief economist at the Institute of Directors, said because there has been no reigning in of ‘excessive and unwarranted’ public spending there is ‘little opportunity for pruning.’
‘Initially I don’t think Brown will have to do too much,’ said Leach. ‘He could feasibly say that although figures won’t add up over the year, over the a five-year cycle they will.’
Leach agrees with most economic commentators about likely growth rates.
A revision to around 1.5% for this and next year will add up to a deficit of approximately £10bn in real fiscal terms and that Brown will have to make ‘big changes’ in order to fill it. ‘It will almost inevitably come on national insurance contributions,’ he said.
This is likely to be borne by both employer and employee contributions which, Leach said, is something that the institute is ‘very much opposed to.’
But Kendrick was not convinced, saying Brown would want to lay off business.
He expects the chancellor to target consumers, either with a hike in the rate of VAT or more politically viable targets such as company car tax changes. And business will get a further boost with possible changes to quarterly instalment payments of corporation tax (QIPs).
Companies are subject to penalties if their QIP calculations are not accurate. But companies are expected to be given the go-ahead to provide QIPs on previous years results. ‘It’s all about removing red tape for business,’ said Kendrick.
A Treasury spokesman was unable to confirm when a date for the Pre-Budget report would be announced.