Open Road

Monday Nov 24th 2008

Pre-Budget Realisations

My guesses from a quick skim what we will all start to read about in the newspapers over the next few days:

First of all of course some sneaky tax increases not mentioned – as well as the increase in rate for those earning over £150,000 tax allowances for those earning between £100,000 and £140,000 will be halved – this will raise £1.32 billion by 2011, about twice as much as the increase of the top rate.

I am sure we all heard that sin duties on fuel, alcohol and tobacco are going up to compensate for the VAT cut. What you may have missed is that when VAT goes back up duty will stay up. And incidentally fuel duty goes up 2p a litre from next Monday.

You might have thought that after last time government would have learnt about taxing pensions, but in fact pension lifetime and annual allowances are being frozen, netting an extra £400 million by 2011.

The idea of the government’s measures is they blow a hole in the finances now but then start to fill that hole by 2010. However, a quick glance at Table B5 will reveal that this depends on further value for money savings. These, whilst worthy, always have a slightly surreal, non-cash generating air. Apparently 86,700 civil service posts were lost between 2004 and 2007. However, the size of the civil service went down from 530,000 to 490,000. So, there must have been some new posts.

There are some other optimistic wheezes lying at the back of the budget – estimated unemployment claimant count of 1.41 million only in 2009, and estimated Consumer Price inflation of a paltry 0.5% by the last quarter. Pessimists may note that Retail Price Inflation is estimated at a spectacularly deflationary -2%.

You heard it here first.