So, the Chancellor has surprised many by announcing that the Budget will be on 29 October. In my previous blog I speculated why it had moved to a Monday and have been scratching my head ever since wondering what this Budget might surprise us with.
I guess he had possibly hoped that an outline Brexit deal would have been done before he had to unveil his plans, but clearly that’s not going to be the case. But we can be sure that, snap General Election aside, this will be the last Budget before the scheduled exit from the EU in March 2019.
Brexit will, however it pans out, have a long-lasting effect on the UK economy. But there are lots of other purely-domestic issues to consider too. Productivity has been falling, and simply bringing productivity back to levels seen ten years ago could add several percentage points to the economy’s growth.
Although there has been a welcome boost to the country’s wealth in recent months, this can’t, and shouldn’t be, a giveaway Budget. There are many areas of the public sector – health, social services, education to name but a few – that desperately need increased funding. Tax revenues need to be maintained as a minimum, or more austerity beckons. In my personal view, taxes need to rise, and by quite a lot.
There’s no point in raiding the “rich”. Politically that might be a winner, but in tax terms it raises a paltry amount, and has the risk of driving wealth offshore and dampening the enterprise economy. We need significant tax rises: that means hikes in both income tax and corporation tax, and possibly raising consumption taxes such as VAT.
All this has to happen at the same time as making the UK attractive for business in the post-Brexit new world. If we want to become the next generation of global tech companies, we need to encourage and nurture the present and future embryonic businesses that will change the world. We need to further encourage R&D and enterprise/innovation.
What do I expect to see?
Increase to Class 4 NICs
Tightening of rules for the “gig” economy
Continued focus on tax avoidance
Increased taxes on pension funds
Tightening of CGT reliefs such as Entrepreneurs’ Relief
Possible wealth taxes such as a 10-year charge on assets above £1million
What would I like to see?
Standard rate of VAT to rise to 22.5% with more zero-rating for essential goods and services
Corporation tax reduction to be stopped and return to 20% standard rate and a tax on undistributed profits
Income tax additional rate to rise to 50% and a new income tax on investment income
Definition of R&D to be widened and R&D tax reliefs to rise to 300%
Extension of Patent Box regime to all intellectual property (not just patents)
Very little of this will happen. No doubt we will see a massive Finance Bill with lots of unnecessary tinkering with legislation, when we need radical changes, simplicity, and a clear indication of forward-thinking, progressive fiscal policy