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Alistair Darling’s first budget
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It seems Alistair Darling drew the short straw for his first Budget, inheriting the post of Chancellor just as the UK economy was due for a wobble. Indeed, against the current economic and political backdrop, the Daily Telegraph suggests Darling’s first Budget will be the most “tortuous” for the Labour party since 1997.
“No doubt we all hope that there will be less controversy over his Budget announcements than around those in October’s Pre-Budget Report,” says Bill Dodwell, a tax partner at accountancy firm Deloitte.
Issues such as changes to the capital gains tax regime as well as plans to crack down on non-doms – people domiciled outside of the UK for tax purposes – created a flurry of headlines following the Pre-Budget Report.
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Will taxes increase?
Meanwhile, the Institute of Fiscal Studies has already warned that Darling may have to increase taxes by as much as £8bn to prevent breaking the Government’s own financial rules.
“The biggest concern is to keep the economy going and not have inflation growing too much,” says Philip Pearson of P&P Invest, a Southampton-based independent financial adviser.
“People want consistency and stability and this hasn’t been a very good period for Darling at all.”
Maurice Fitzpatrick of accountancy firm Grant Thornton says Darling will be under pressure to provide reassurance that the inheritance tax threshold will continue to rise beyond that previously promised, and to tweak Stamp Duty so as to lessen its burden – particularly upon first-time buyers.
Fitzpatrick suggests this could be done by raising the threshold for paying Stamp Duty, or offering some sort of exemption or reduced rates for genuine first-time buyers.
Mr Fitzpatrick says the Chancellor is also coming under pressure, particularly from medical lobby groups, to increase the duty on wines and spirits. He says increases in duty on these products have not kept pace with inflation under Labour, while consumption has increased by 50% over the same period.
And with rumours that there is potential for a general election to take place next year, perhaps the odd sweetener might get thrown in to help us swallow our medicine.
Just how Darling decides to react to the pressures upon him will all be revealed when the red briefcase is opened – but a look at the Chancellor’s route to No.11 could give us a few clues.
