Budget round-up: The latest predictions

The Sunday Times said a predicted tax cut of as much as Pounds 6bn in the Budget would not stop the Bank of England introducing further cuts to interest rates.

Some analysts suggested a Pounds 6bn cut could lead to an increase in bank rates, rather than a reduction in the rate, but Treasury sources denied this. The Institute for Fiscal Studies said the chancellor should not giveaway more than Pounds 4bn.

The Sunday Business said Gordon Brown would introduce measures targeted at middle-England voters as part of a pre-election giveaway, ensuring average-income workers were better off from 1 April.

The chancellor is expected to increase the slice of income workers and savers pay 10% tax on, and while this will put more money in the pockets of the poorest, the greatest beneficiaries will be the middle-classes, the key to Labour’s re-election chances.

Senior economists said the widening of the 10p tax bracket would have a limited effect on eliminating the poverty gap, but said it was the kind of measure expected in an election year.

Brown is expected to respond positively to calls for an extension of R&D tax relief, spearheaded by the CBI and the Trades Union Congress.

The CBI and the TUC called on the chancellor to introduce greater capital allowances for SMEs, as well as introduce initiatives to boost industrial productivity

A recent report on said the extension of the R&D tax credit would be of greatest benefit to pharmaceutical companies which are the UK?s greatest spenders on research and development.

The Engineering Employers Federation, a bitter opponent of the government’s climate change levy, called on the Treasury to introduce a 50% incremental tax credit, to include large firms. However, the Treasury said it was unlikely to extend climate change levy discounts, as proposed by the EEF, as they were not inline with official policy.

And UK technology companies called on the chancellor to revise the tax treatment of share options, lifting the Pounds 30,000 limit on share option plans, to prevent the loss of intellectual capital.

The FT claimed Brown would unveil a Pounds 4bn package of tax cuts aimed at benefiting new mothers, low and middle income families, gamblers, motorists, pensioners and savers.

In addition to a widening of the 10p income tax band, the financial daily predicted an increase in the flat rate of maternity pay from Pounds 60 a week to Pounds 100, as well as extension of maternity leave from 18 to 26 weeks. Brown is also expected to introduce a ‘baby bonu’ to benefit parents with children younger than one year.

It’s now been widely reported that gamblers and bookmakers will see the end of betting tax in favour of a tax on bookies gross profits, while pensioners can expect an extra Pounds 5 per week and Pounds 8 per week for couples.

Motorists should benefit from a Pounds 2.3bn package of cuts in motoring taxes, while those with savings accounts should see the Pounds 7,000 tax free limit extended to 2006.

Links’s Budget 2001

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