Tax cuts expected in pre-Budget report
Monday 24th November 2008, 6:00AM GMT.
Chancellor Alistair Darling is set to release the government’s pre-Budget report today with many anticipating tax cuts to prop up the ailing economy.
Last week, thousands of job cuts were announced by major firms across the country, while repossessions rose by 12 per cent, putting pressure on the government to find some answers.
The pre-Budget report, introduced when Labour came to power in 1997, provides an update on the economy and proposes new tax measures to be included in the spring Budget.
Prime minister Gordon Brown has already hinted at tax cuts for hard-pressed families and relief for struggling small businesses.
But there is still speculation about who would benefit from these cuts and how best to stimulate the economy.
An extension of the tax credits scheme is a likely move, according to economists from the Centre for Economics and Business Research (CEBR).
However, chief executive Douglas McWilliams has doubts about expanding the system.
“We have praised Gordon Brown as chancellor for having had some success in redistributing incomes at the lower end of the income scale.
“But an unfortunate side effect is to make it very difficult for the beneficiaries to do better for themselves by getting better jobs, working harder or working more.
“A badly thought out increase in tax credits would make that problem very much worse,” Mr McWilliams said.
Another possibility is to cut taxes for everyone by cutting the basic rate of taxation or increasing the personal tax allowance.
KPMG has estimated a 1p reduction in the basic rate for the current year would hit the taxman for £4 billion and the maximum benefit would be £348 for those with earnings over around £41,100.
If the basic personal allowance was increased from £6,035 to say £7,035 with similar increases for age-related allowances, the cost would be around £7 billion but benefits for taxpayers would range from £200 to £400.
Tax cuts could help the economy by giving everybody extra cash to spend in the shops.
However, research from Axa has called this theory into question.
According to a survey, only one in five (22 per cent) of Britons would spend a £60 a month tax cut on the high street on goods such as clothes and electrical items, while almost half (49 per cent) would use the money to pay for day-to-day living expenses such as food and fuel bills.
Trade union Unison has proposed an alternative, asking the chancellor to use the pre-Budget report to introduce a windfall tax on energy company profits and measures to help people who are struggling with their mortgage to keep their homes.
“The government has already taken steps to help out the bankers. Now is the time to focus on helping working people,” said Unison general secretary Dave Prentis.
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When in a hole it is always best for the first thing to do is to stop digging not more Tax and Spend. This problem was caused by too much debt both public and private. We need to get back to living off what we can afford rather than hope some majic is going to happen to make things better. We need a period of pain to let the economy adjust hard but true. Lets hope we learn from this and are better prepaired for the next round of Boom and Bust.
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I think Dave Prentis is right to ask the government to do more for working people.
The proposed tax increase for the wealthiest (from 40p to 45p over £150k) is a small step in the right direction – especially when you remember the massive (40%+) tax cut they had in the 80′s.
The rich have been coining it at our expense for years, and the recent financial difficulties have been largely due to their greed and incompetence. I’d like to see their tax rate for their higer earnings put up to 60p until we’re through the recession – and do it now – they’d still weather the recession more than comfortably, unlike many ordinary working people.
22 per cent of people spending their extra bit of cash on the High Street doesn’t sound a lot – but given the number of people involved we’re talking about a lot of expenditure there which will hopefully help protect some retail and manufacturing jobs.
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as a suddenly richer pensioner i congratulate the govrnment and chancellor on most of their measures. i think the 45p tax rate could be raised to 50 p in say 3 years time and the 10p rate should be immediately reintroduced. all in all better proposals than diddy david cameron’s whose bunch of spivs seem to be sat on their hands refusing to say what they would do. ok it has only set back their return to government by decades. i can live with that. i do hope these measures work, otherwise tax payers and n/insurance payers are in for an expensive 10 years
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Peter,
Typical left wing twaddle. What have we had today, a decrease in VAT to be paid for by increased fuel duty when we all thought we could breath a bit easier over fuel after recent hines over £1.20 a litre. 1/2% increase on National Insurance contributions – a quite direct Income Tax rise under another name. This will affect every single person earning over the pittance of £20,000 a year.
A naive and decietful assertion that the economy will start to improve at the end of 2009, when, thereafter taxes will start to rise and go through the roof. A decietful assertion that pensions will increase by 5% next year. We all knew this, this is automatic every year based on Septembers % wage increase. Pensioners will be given a few pounds extra as a one off in January. It won’t make them rich by any means – it’s another insult.
And what do we have to do to get all these dubious “TEMPORARY” benefits, we have to make the biggest borrowings that the countries history has ever had to make. These borrowings will continue to 2015 when, without any proof or solid grounds for saying so, Darling say’s the country will start to pay them back by another swirl of increased taxes.
So, what do we have, a few tax benefits with a few tax increases to balance them out, eye watering borrowings which will continue to 2015, a stated tax bombshell to hit us all after 2009 with further massive tax increases after 2011 – ie AFTER THE ELECTION.
Peter on another thread I seem to have read you mentioning Tory spending cuts and the consequences etc etc etc etc which made amusing reading. Correct me if I am wrong but did not Darling mention a severe curtailment of public spending in his budget. The Tories were in favour of FUNDED tax changes and holding public spending to normal annual increases. What have we had from Darling, UNFUNDED tax benefits and a severe curtailment of public spending, one couldn’t make it up. Let’s sit back and see, shall we.
I want the Tories to give the election to Labour on a plate, perhaps this country will then finally see what a coven of desperados they have elected when 2011 kicks in.
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Well lets decide? do we do nothing and let the UK go though a painful demise or do we try something that might or might not work? action is always better than no action!
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just remember the mega bucks when your 5 banks are sold off. lie back and enjoy, smile and spend!
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Stuart,
Are we to take it then that you are happy to sit out the coming recession and do nothing to attempt to alleviate the pain? Can we assume that you don’t see that the extremely wealthy who have caused this recession should also fund the recovery?
The worst possible thing to do in a recession is to stop all spending – we saw that in the 80s and it was a disaster for many honest working folk.
I’m disappointed that Darling didn’t go further – after all, if NI contributions are going up by 0.5 percent, this won’t hit the rich as much as it should.
What he should have done is remove the ceiling on NI contributions, and make sure that wealthy people pay NI at the full on all that they earn (over £770 per week). The rest of us pay full NI on all of our pay – why shouldn’t they?
As for public spending, he has brought forward a number of programmes to help stimulate the economy. Hopefully at the end of the current recession we will at least have decent infrastructure in our schools and hospitals, given that the government have already upgraded many primary schools in particular, and now intend to push ahead with this.
Compare that to the dereliction left in primary schools at the end of the previous administration, and you can see the progress that’s been made. Or perhaps you begrudge our children a better start in life? We know from previous experience that the first places the Tories go for in spending cuts are education and health – remember Margaret Thatcher – milk snatcher?
It’s been quite amusing to see Bullingham club toff Osborne seething quietly at the idea of tax increases for the rich – but he can’t say anything against them because morally it’s the correct thing to do.
It is also interesting that as a result of the current climate the two main parties are beginning to polarise in their views. The Tories are reverting to their ‘slash and burn’ policies to see us through recessaion, and the Labour party are looking to borrow in order to stimulate the economy. The latter seems to be the method favoured by most economic analysts.
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God help us, this past 11 years have been an utter disaster, New Labour fooled you all.
Let them finish the job and Country too boot.
No more boom and bust!!!
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Stuart,
I just noted your comment about the Tories giving the election to Labour on a plate – Ah…so that’s what Osborne is up to!
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Devon, same as me, you are richer by £60 – ONE OFF, the much vaunted increase for pensioners is exactly, no more and no less than the normal yearly increase which we were going to get budget or no budget. But it looks good doesn’t it to mention it in the budget – when it has precisely nothing to do with it. We will however, get those pensioners, Labour to the core, voting like their long gone ancestors did all those years ago, looking at it like manna from heaven believing that this disreputable lot have given them a huge increase in their State Pensions. Poor people, it’s the likes of those that Labour plays to and the likes of those that keep them in power.
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Now, Peter, don’t lets start fantasising to much, I can stand the odd exageration and bit of spin now and again but to bring up Maggie after 11 years of Labourite disaster is taking things to far.
As opposed to going through your funny comments line by line I will just content myself with your mention of that elite group, The Bullingham Club. You know, that group of intelligent people that many, many Labourites aspire to, but due to their lack of intellectual capacity, their lack of “breeding”, their lack of a toffee nosed accent and the fact that they eat peas off a fork, they are socially and academically barred from joining it even if they could put their hands on the amount of money required for the joining fees and even if they could get rid of their Andy Cap image.
Then I ask myself the question, who would I rather support, a few intelligent, harmless toffee nosed twits who a few years older will have grown out of it and will make sound politicians or a similarly sized group of (perhaps larger as I know at least 5) poisonous, dangerous, noxious people who, during their youth and University days were card carrying members of the Communist Party.
Given the choice, I go for the Bullingham Club, they just wear silly clothes and drink like fishes, the alternative amongst a few in the group that you support would have waved the red flag, worshipped a picture of Lenin and would have policed us with an NKVD.
No thanks Peter, your type are not for me or the greater majority of sensible people. Just for your information, the Bullingham Club is no more harmful than the Boy Scouts and certainly it is just as juvenile until maturity clicks in when they go into the big wide world.
You are plainly running out of excuses for this lot in power to think up that little aside.
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