The Chancellor – Right Or Wrong?

Ray Stewart Business, General, Tax Matters Leave a Comment

I am not going to re-iterate the provisions of the “Pre-Budget Report” as these are mainly widely known now.

But was the chancellor right to do what he has done?

Was it formal budget in all but name just so that this government can force these changes through without discussion and all party approval? The sceptic in me says YES.

Little has been made of the total debt the government are running up overall. We hear snippets that suggest borrowing this year of £78bn and then another £118bn next year. I haven’t seen much reference to the total the country will be in debt by in a couple of years… a staggering £1,000 billion.

All this tinkering about is just to make the government look good before a general election.

We all know that the repayment pain of this staggering pile of debt will start just after the next election. NI is going to rise, VAT will be back at its current rate again, higher rate tax will be 45%, road tax will have significant changes (most likely upwards) with 6 new bands of vehicle excise duty etc..

As far as business owners are concerned, they now have to reprice everything in their stores, websites, brochures, tills, menus etc all by Sunday evening . Any compensation for this – no.   Oh, and don’t forget we have to put it all back again next christmas when VAT goes back up.

Already hardpressed hauliers are going to suffer another cost blow because the VAT they currently reclaim in fuel is being reduced and replaced with fuel tax they cannot reclaim. Thanks mate!

All this fuss about we will give businesses time to pay their tax bills is a smoke screen. This has been going on for years now ever since self assessment introduced the creditcard like statement for the tax owing. Maybe the penalties will be suspended for a bit – we will see how that works in practice because VAT is a funny tax and there is not yet any provisions in the law for this to work and interest to be paid. Perhaps we will see the magic wand at work again on this and law mysteriously changed overnight.

The recession will be over next year he says. Wasn’t it just a few weeks ago the government denied any prospect of a recession? Get real mate. No recession runs its course in less than a year – and the £20bn being dropped in the ocean now (sorry, over the next few months) is not going to make a jot of difference.

I bet there will be retailers, already offering big sales discounts, who will say thank you and use the VAT reduction and keep it to boost their margins rather than pass it on – partly to soak up the recent rises in minimum wage. I would. I very much doubt though that it will stir anyone to start buying no-essentials again just yet – certainly not houses.

A big thing has been made about the loss relief businesses are being given. The fact is that these reliefs have been around since before my day (and that’s a very long time ago). All he has done is extend them slightly. But as he expects the recession to be over next year, why has he made loss relief now available for 3 years and limited the extra relief to a mere £50k?

Oh yes.. We mustn’t forget, he has also promised £15m to offer debt advice. I wonder if he has taken any himself?

Why couldn’t he do something more constructive like bring back mortgage tax relief, give some sort of council tax relief, force the banks that have taken billions of our money to start lending again to businesses and house buyers??

This government is seriously dangerous to our financial health. I used to be a conservative in years gone by, but then they had a long run in government with a large majority and power definitely corrupted the way they conducted themselves. This led to Maggies downfall and John Major losing all credibility and thus opening the door to new labour. I was pleased when there was a change, a new breath of life – but not for long.

Once again, we now have a government of 11 years or so and they are becoming desperate to hold onto power. We should have had an election when Tony went but they knew they couldn’t win it so we didn’t. We should have had an election last year when all the hints and spin made us think one was imminent and then Gordy bottled it because he knew he couldn’t win it.

So here we are. The country is in trouble. We have an unelected Prime Minister leading us. The government are throwing money around as if they can stop the dike bursting (like the little dutch boy with his finger). They panic supported Northern Rock with about £100bn. They recently “invested” how much was it into banks – about £200bn.

To get that bank figure I looked at some Treasury websites and had to laugh. I found this quote when they announced £37bn for HBOS, Lloyds and RBS on the 14th October 2008:-

Quote:
Regional Minister, Nick Brown said “These are unprecedented times, and the Government has acted decisively now to support the affected banks so that homeowners can access competitive mortgages and small businesses can get loans at the same levels as in 2007”.

And of course, that came to pass didn’t it!

The problem is if labour are kicked out (which I doubt at the next election because of these give aways) who would replace them?

I don’t think the conservatives are acting much like a government in waiting at the moment and the Lib Dems don’t seem to have much chance – so who?

And whoever wins… they are going to catch the economic fallout of all this gambling and we are going to be taxed until the pips squeak – no doubt back to the old labour ways – just to get this gargantuan £1,000 billion debt pile reduced a bit.

And very quietly, they are planning to sell off at least the Royal Mint and the Met Office to raise a bit of cash to help.

Anybody else got any views??

~Ray

Ray Stewart
I am a qualified Certified Practising Accountant having passed my final exams way back in 1981. I actually can’t believe that was 37 years ago!! Anyway, I am now in my 60’s and I have been running my own business since May 1983. And before you ask, no, I have never regretted a moment of it! Part of the membership requirements of my professional body now dictate that I spend quite a lot of time on “CPD” - continuing professional education (one of their better ideas) - and over the last two years I decided to study business growth and marketing. I have learnt such a lot and that knowledge has radically changed my old “accountants” approach to business. It has made such a difference to the way I work and operate I feel that I just have to pass on this knowledge. It is simply too powerful to hold back!! - but I will try and do it in simple terms rather than expecting you to spend hours, as I had to, working through the difficult language that trainers seem to use to pass on their concepts. I hope you find the blog a useful resource and interesting place to visit as the months pass. I will do my best to keep up the flow - but if there are any topics you would like me to cover, then please let me know. Ray Stewart
Ray Stewart
Ray Stewart

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