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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Lambert Chapman LLP’s Nick Forsyth reviews the 2009 Budget

I feel for Alistair Darling. No, I really do. After Blackadder Goes Forth one gets an image in ones mind when his surname is mentioned and his eyebrows attract unnecessary attention before we think about his job as Chancellor of the Exchequer. It’s always difficult to follow a great predecessor (although Bob Paisley did a reasonable job of it) but to follow a fool should be a straightforward task unless he remains your Boss, survived far too long in your current job and wasted all the money he took by whatever stealth method used.

Mr Darling’s job is to get Labour to the next election and do what he can to get his Boss past the post in first position. It really is a tough one! To hamper his main opponent he uses the guile of a higher tax rate in an effort to make them commit tax  plans and then looks to continue spending money to keep his voters in work for as long as possible. Can it work? Possibly it can but these days the electorate, or those of them who can bother to use the vote might be a little less niave than in the past, though I understand a donkey wearing a red rose was elected in the now defunct Dunfermline East in June 1983.

 

Over the years I’ve met many a board who are floating overambitious with their income and growth projections but spot on with the costs. Borrowings normally start reducing, sometimes quite rapidly, in month 10 for the plan but if the plan is not achieved it all it can be catastrophic. I think we have this situation here and worry that things will turn out much worse than currently being forecast.

 

When I heard the speech I did like the increased capital allowances and carry back of losses but due to the loss sums being restricted these might not amount to that much help. Increasing taxes is inevitable but to tax the entrepreneurs might prove to be not such a smart move.

 

In my mind our two main parties are both bereft of ideas and an election is looming. It’s a bit like the upcoming Newcastle United Vs Middlesbrough game; everything hangs upon it yet neither side has any clue on tactics or how to win the game. In this case they might both end up losers whilst in the election it might be the winner that lives to regret it.     

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