Wednesday, 24 March 2010

Budget 2010

Just finished going through the official Budget Report.

To give Labour some credit, it could have been worse. However, it could have been a damn sight better.

First off, their forecast for the budget deficit this year has been revised down from £178billion to £167billion, due to higher-than-expected tax revenues. In fact, overall government spending has increased from an estimated £676billion to £704billion. Fortunately, the increase in tax revenues has bailed them out, otherwise they'd be in even more trouble. So the budget deficit has been reduced by £11billion by sheer dumb luck, rather than any serious attempt to cut it.

The Chancellor also reaffirmed that Government's commitment to halving the budget deficit over the next 4 years. And just how is this to be accomplished? A radical curtailing of a hugely expensive and bloated public sector? No. A progressive reform of a benefits system which gives incentives to idleness? No. What, then?

Same old Labour - indirect taxation.

Now, I despise indirect taxation. I think that tax should be redistributive, but indirect taxation does none of that. Indirect taxes are typically levied as fixed costs regardless of means, and therefore the lower paid tend to pay a higher proportion of their income in tax as a result. This is completely unfair.

Labour like them, because they're pretty difficult to avoid.

So we're slammed with them - a rise in fuel duty, a rise in alcohol duty (particularly on cider - a tax on apples? I ask you!), a rise in tobacco duty, and of course, the infamous Telephone Tax to pay for super-fast broadband.

Of course, indirect taxation can't account for the forecast reduction in the deficit by £100billion over the next 4 years. How is the rest to be achieved? Well, astonishingly over-optimistic forecasts for growth and tax revenues, of course! Oh, and don't forget some clever tax agreements that we're about to sign with the Dominican Republic, Grenada, and... wait for it... Belize.

Howls of delight from the Government benches. Yeah, too late - Lord Ashcroft has already agreed to become fully resident here.

There were some good points:
  • An increase of £3,000 to the ISA allowance, taking it up to £10,200 per year, and a commitment to increase the allowance in line with inflation for at least 4 years - a measure which is long overdue;
  • Increasing the Minimum Wage by 2.2% to £5.93 per hour in October - I know it's not particularly liberal, but if anyone has any complaints about the Minimum Wage, they should try living on it.

But generally, few and far between. Further increases to Gordon's favourite income redistribution tool, the tax credits system, are also listed. I'm not a fan. Tax credits are complicated, expensive to administrate, inherently unfair in the way they discriminate against single parents, and give financial inducements to have children.
The highlight of the event was the Stamp Duty announcement - 'the threshold for Stamp Duty has been raised to £250,000', trumpets the Grand High Witch of all the Taxmen. Closely followed by 'paid for by an extra 1% on properties worth more than £1million'. Cue rabid delight from the Government benches.

So, let's have a look at the report, shall we?

The threshold for Stamp Duty has been raised temporarily for 2 years, and applies to first time buyers only. The new 5% rate for properties worth over £1million has no such indicators of conditionality. In other words, it's here to stay.

We have a stealth tax! Couldn't be a Labour Budget without one!

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