Economy will be Brown's bugbear
FDs predict the chancellor will be forced to raise taxes in thrid term as economy stutters
Link:
Brown’s
end-of-term report
Over two-thirds of the nation’s finance directors believe the economy will
give chancellor Gordon Brown a ‘bloody nose’ during his third term, according to
the latest Accountancy Age/Reed Finance Big Question.
A slowdown in the economy is widely expected in the UK over the next two
years, after an unprecedented period of growth despite a worldwide economic
slowdown.
‘It is likely his golden rule of fiscal prudence will need a number of
stealth (and not so stealth) taxes to make the books balance,’ said one FD. ‘I
reckon VAT at 20%, national insurance for higher earners up to 3% or 4% and
maybe employers’ NI going up to fill the hole. I think Gordon has a problem.’
The expected economic slowdown will be driven by a reduction in consumer
retail spending and a further slowing of the housing market. One finance
director, responding to the survey, said that ‘the easy way out for the
chancellor is to be offered Blair’s job’.
Matthew Walton, of the British Standards Institute, said: ‘Labour probably
won’t be able to handle the changing economy over the coming term.’
The concerns of Britain’s finance directors came at the same time as an ICAEW
survey into chartered accountants working in business found that confidence in
the UK economy is lower than at any time in the past two years.
Eric Anstee, chief executive of the ICAEW, said: ‘The Treasury can expect a
much tougher ride this year in terms of meeting its growth target of at least
3%, as this survey and official data show the economy cooling down to trend
growth at around 2.5%.
‘The economic slowdown will put pressure on taxation revenues, and if the
Treasury wants to meet its spend-ing plans and restrain borrowing, tax rises
look likely in 2006.’
Despite several signs that the economy is heading for a slowdown, some
finance directors remain bullish. ‘It is a rather large assumption to say there
will be any kind of slowdown at all,’ said one respondent. ‘I don’t see any
signs of it myself.’
A total of 69% of respondents to the latest Accountancy Age/Reed Finance Big
Question said that a slowdown in the economy would deliver Brown a bloody nose
during Labour’s third term. Just 10% of respondents believed this would not be
the case, while the rest were neutral.