Like flowers blooming after a desert rain, the past few days have seen a rush to publish wish-lists ahead of the Budget due on Wednesday.
Unfortunatly for most, chancellor Gordon Brown is increasingly in a bind between the Blair government’s commitment to public spending and the Treasury’s own rules on borrowing.
There is, therefore, considerable betting on which new taxes the chancellor might introduce to pay for the increasing largesse.
An easy target is rising house prices. One of the latest rumours is a new stamp duty band will be introduced at a level of 2%, neatly splitting the jump from 1% to 3%, which is increasingly hitting property owners in the Southeast.
a 2% rate would double the revenue’s income from sales of the average London property, which at the moment, presumably, goes for £249,999 plus fixtures and fittings.
The spectre of CGT on first-home property sales is another way the Treasury could boost the coffers, but is mostly considered a long-shot because of the political damage such a move would cause.
Of course, much of the chancellor’s speech will be taken up with clarifying policies already announced, and nowhere more so than in the area of pensions.
Simplification of the taxation of pensions needs answering if the industry is to be capable of hitting the A-Day target of April 2005, while Brown will be expected to at least acknowledge the National Audit Office’s statements on the number of people caught out by the £1.4m lifetime limit.
Backbenchers are also still angry about the lack of compensation linked to the DWP’s proposed Pension Protection Fund, which will not cover past losses.
Also linked to long-term savings is the Child Trust Fund, of which there is some hope for more details, because it is difficult for providers to start designing their offerings unless they get full clarification on how the funds will work from a taxation standpoint.
Savers and investors may be fed some carrots to offset the pain in the form of additional efforts to provide everyone with a basic bank account and firming up of breaks for investments in smaller and start-up companies.
VCT and EIS operators were given some guidance in the Pre-Budget Report, but have been waiting six months for more details.
Overall, people with direct exposure to the stock market will be looking for any signs of weakness in the government’s pledge not to break rules on national debt as a proportion of GDP and on investing over the economic cycle. Any slippage on these commitments will be seized on by the City and shares could suffer another beating.IFAonline
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