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The Emergency Budget – what’s it likely to bring?
It seemed barely five minutes since the previous Chancellor, Alistair Darling, had announced his Budget for 2010 when his Tory successor, George Osborne, stepped in to say he was holding another one on June 22nd – exactly six weeks after the new coalition government took office.
The Tories had already announced before the General Election that they would hold an ‘emergency Budget’ within 50 days if they took power, effectively rendering Mr Darling’s version null and void before it was even unveiled.
According to Mr Osborne, failure to tackle the UK’s record deficit would be “disastrous”, meaning another Budget was necessary – not the mention the £6bn spending cuts recently announced.
The announcement of a second Budget before the first one had even taken place clearly created a great deal of uncertainty, with many left wondering where they stood in terms of taxation – particularly in light of the fact a second Budget can pave the way for further tax raises.
So now the question is: what will the new Budget bring?
While there is clearly much speculation about what the Chancellor WILL announce on Tuesday, there is the equally important question of what he SHOULD announce.
For starters, Mr Osborne needs to boost entrepreneurial investorship, in particular looking at business assets. It is thought that the Chancellor is considering changes along the lines of the old taper relief, where the longer you held on to your assets, the better the tax breaks when it came to disposing of them.
As anyone in business will know, taper relief was replaced by entrepreneurs relief in April 2008 and it would be disappointing if a change of regime was brought about so soon, bringing yet more uncertainty in what are still difficult economic times.
Mr Osborne needs to move away from this process of “what’s going to happen” – businesses need to know where they’re going to be in the next four or five years. Ever-changing legislation certainly isn’t going to help.
There is also the question of whether any such changes will be backdated to April, something that has never been done before. While many people would expect the Chancellor to push these changes back to April 2011, there is a strong likelihood that they will come into effect almost immediately.
He will also need to put measures in place to encourage new entrepreneurs by actually making people WANT to go into business in the first place, ideally the state aid made available to such people.
The scandal over MPs’ expenses – particularly where second homes were concerned – could play a key role too.
Mr Osborne looks likely to abolish tax relief on second homes, which he can justify by blaming those MPs who fell foul of the rules and claiming he’s doing good by repairing the damage.
One thing is for the certain, however – everyone will be watching very closely to see if the new Budget does indeed tackle the deficit. Only time will tell how quickly we start to see improvements but, at the moment, it looks like it could be a busy time for accountants.
John Kinsella
Watson Buckle