Budget 2012 - the post mortemPosted by Anthony Page
So what should we take away from yesterday's budget?
Economic stability is a key requirement for any country, and it still eludes us. We are still vulnerable to turmoil in the Euro Zone, the ongoing global slowdown and increasing oil prices. Growth in the UK for this year is projected at a mere 0.7% growth – and even over the next three four years, it is only expected to average 2%!
Against this backdrop we have seen a Budget designed to be all things to all men. The Chancellor has steered a very careful course for taxpayers facing ever increasing cost of living and, at the same time, still create and environment for growth and job creation. To do this he has closed tax loopholes and levied tax increases.
As predicted, one of these is Stamp Duty. From now on, if you use a company to purchase your house, you will still have to pay 15%. On top of this, Osborne has raised duty on properties costing over £2 million; from 5% to 7%.
Tax on cigarettes has risen by 37p a pack, but alcohol only saw an already announced 2% rise. Sadly, however, we saw no reduction in fuel tax. On the other hand, this is countered by the raising of personal allowances to £9205
But in so doing this, Osborne has scrapped the increased age allowances pensioners receive. Many newspapers have read this to be a de facto increase in tax for the pensioner, but current allowances will remain until they are equal with general allowance thresholds, and after that they will be the same for everyone.
So, the man in the street is going to be a bit better off and will not feel any extra tax burden hitting his or her family. The rich will pay more but in the long term even these additional taxes will be balanced out. It is inevitable that richer taxpayers will also prosper from tax changes unless we want to pick them out for special treatment, which would be a disincentive to economic growth.
Osborne has also reduced Corporation Tax, and made clear his intent to reduce it even further to 20%. There are also substantial funds being made available for companies to borrow via the Business Enterprise Schemes for investment and research, plus a new loan scheme for young people to get help to start new businesses.
It seems we have been given a 'zero budget', where money is just moved around to be more effectively used. The implied message is that the government remains determined to reduce debt and will not try to buy votes at the next election.
If Osborne can pull this off under the current economic outlook then he will do well. His main purpose is to keep us on course to reduce government debt and create an environment for job creation, less redundancies and more business growth. Time will tell if this strategy will succeed.
Will this Budget sent to right message to the outside world? Yes. But will it have us all rushing to the shops to spend our tax gains? Probably not. We still have a long way to go before the UK economy is fit and healthy once more.
Indeed, we've had to face up to what will be, at the end, a decade of austerity. The next problem will be how we can ever get people spending again?
In closing, could Osborne have done any better? I doubt it. But at least we're not Greek.
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