Lambert Chapman LLP’s Chris Harman reviews the 2009 Budget

 In my Budget 2008 comments I wrote ‘I expect this to be Alistair Darling’s only Budget. He has been handed the task of implementing some unpopular changes and will no doubt take the flak for a few more financial problems and then will move / be moved on.’  Alistair has now got two Budgets under his belt, is still in office; what more financial problems are to come?

 The world economy is in a mess and we shouldn’t blame Alistair.  The philosophy in the good times of ’spend more and borrow more’ could only lead to problems when (not if) bad times returned. 

 

I am shocked by the inaccuracies of the IMF and the Government in their estimates of both global and national budgets.  The estimates given to us last autumn of the world and of our nations share of ‘toxic debts’ from the lending strategies of banks were dreadfully inaccurate and far too low.  We now get fed more bad news and told that it will get better soon.  Why should we believe that?  The recent track record of forecasts of debt, borrowing and growth are so poor I can only see more bad news to come.  I also expect a future Budget to include a new form of ’short term tax’ (this happened many years ago when William Pitt the Younger introduced income tax to fund our war against France).

 

This year Alistair has had to present a Budget that is to kick start and then boost our economy whilst being affordable.  A tough task. 

 

There will be much in the press and media about the finer points of the 2009 Budget and how it will affect business and individuals so I only wish to make comments on four areas;

1.  Car scrappage.  I wonder how much of the £2,000 discount will stay in this country by being spent on cars that have been built here?  How much of the car manufacturers profit derived from the £2,000 will be invested in the U.K?  What will be the effect on the manufacturers of spares for the older cars that will now be scrapped?

2.  Stealth Taxes.  They are still there and the overall tax take is likely to keep increasing.

3.  HM Revenue & Customs Powers & Penalties.  From April 2010 there will be a reform of the penalties for the late filing of Tax Returns and the late payment of taxes.  ‘Reform’ means increasing the penalties as well as removing the current tax geared system that operates in some areas and also applying penalties to employers and contractors for the late payment of PAYE and CIS.  

4.  Efficiency drives. HM Revenue & Customs have been subjected to staff cutbacks, office moves and restructuring.  This has left those staff still within the HMRC unsettled, frustrated and under resourced.  The result has been a reduction in the level of service HMRC provides and an increase in the cost to business and individuals in the management of their tax matters.  The Government has cut HMRC staffing and resources back too far.  The ’savings’ may look good on paper but I feel they will be short term savings and there will be a big cost to us all in the long term. 

 

I do hope that the 2009 Budget won’t, in the words of a friend, ‘over promote and under deliver’.

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