All budgets end up being tagged. Last year's was the pasty and caravan budget. By delivering a 1p cut in the price of a pint this one deserves to be called the small beer budget. And from a tax campaigner's point of view that is exactly what it was.
There is news to welcome from Guernsey and Jersey who have succumbed to UK pressure to exchange information on the accounts of UK residents who use these places. They join the Isle of Man in doing so. The UK expects to collect up to £1 billion in tax as a result, which seems a modest amount in view of the balances held. As a long term campaigner for reform in these islands I welcome that new openness. And I look forward to seeing the measures extended to Bermuda, Cayman, Gibraltar and the British Virgin Islands.
However, let's not celebrate too hard about this change: the UK has not demanded these places automatically exchange information with any other country. The fight for transparency in the UK's tax havens has a long way to go and they remain major centres of concern as a result.
The government failed in other major areas too: there was (apart from a reference to general anti-abuse rule) no mention of any measure whatsoever that will tackle multinational company tax abuse, and the GAAR specifically won't do that. Instead George Osborne encouraged the idea that the UK be considered a tax haven by announcing another tax cut for big business that has absolutely no use for it, but which cut does encourage the race to the bottom in international tax, and which leaves ordinary people picking up the bill instead.
Osborne's pride in walking away from a financial transaction tax was as bizarre: when everyone agrees that the finance sector underpays tax he has just exempted another part of it from stamp duty - and that is a move completely in the wrong direction and which can only destabilise the economy in favour of the City still further.
As for his remaining avoidance measures, perhaps the most bizarre was to announce that there will be no future presumption that partners in limited liability partnerships are self-employed. This is very strange when almost all employment taxation abuse is through a vast army of small limited companies set up solely to get around national insurance - which LLP partners cannot avoid. This was gesture politics that utterly misses the point, deliberately or otherwise, on how to beat employment taxation abuse.
And that summarises the whole budget from a campaigner's perspective: the money to be raised from evasion and avoidance is either small beer or offshore whilst massive loopholes are opened up or encouraged for multinationals and the City. This was a budget big business will love and which will do little to close the tax gap. It increases inequality and the bias against the small business sector (who get a token £2,000 NIC cut in exchange). It is another opportunity lost, but if you drink 1,000 pints to drown your sorrows you will save £10. Doesn't that say it all?
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“Growth predicted to be 1.8% in 2014; 2.3% in 2015; 2.7% in 2016 and 2.8% in 2017.”
I just don’t know how the OBR is able to continue to sign off on such forecasts without any coherent explanation as to what will generate this growth. Although business investment is expected to half in 2013 compared with 2012 – HMT are subsequently expecting a four fold increase in subsequent years.
When I studied economics at University expecting the remergence of the confidence fairy from the bottom of the garden wasn’t given an awful lot of creedence. This isn’t so much the invisible hand but a mystic one I’m afraid,
The numbers are pure BS
Utterly impossible – as have been all their predecessors
I’m sure a large number of businesses will just take their large cash piles and the additional tax cuts and use them to invest in growing economies where governements look to manage and grow demand.
How are you going to create growth when you are chopping around £100 billion out of the economy, cutting public sector jobs by the hundreds of thousands, freezing public sector pay by 1%, (meaning a real terms cut of 2% as inflation of around 3%) VAT stands at 20% meaning dearer food prices and a possible contributor to inflation, benefits frozen at 1% and manufacturing and construction dying on its arse?
Who is going to seriously invest in an economy that is barely bumping along the bottom and is very likely heading for a “triple dip recession?” (though we have never left recession in my view) How is this growth going to magically appear?
If the cheap money being thrown at the banks was actually thrown at the economy to create real wealth rather than ponzi wealth, we would likely as not be out of recession and thriving by now!
Blow the inflation hawks! Prime the pumps!!
Stevo!!
I think there are 2 alternatives to the Keynesian view you propound. The problem is that Gideon doesn’t seem to have thought through either;
1) We don’t want simple “growth” from excessive public consumption, that’s what got us in this mess. We need to be more like Germany, consuming less & manufacturing & exporting more.
Problem – we have little manufacturing left. What has GO done to revive it ? Nothing. His first cuts in CT were actually matched by cuts in the rates of Capital Allowances which, obviously, aid Companies with most plant & machinery.
Yes, he reversed those & yes, he has cut NICs contributions, which helps, but he isn’t doing anything to get credit to those industries & his decision to, instead, offer credit to the housing sector is, simply, gaga. WE (I mean the British taxpayer) actually own a bank that could offer extended credit to manufacturers, but its not happening. Instead we pump up the housing bubble yet again (sigh)
2) We don’t want “growth” from excessive consumption at all, that’s what got us in this mess. We need to be more clean & accept negative growth as a way to cleanse the planet.
Problem – allowances for ‘fracking’ are highly contra-indicated & a Govt allowance to pump up the housing market makes no sense if we are actually expecting living standards to fall. No-one will EVER pay off these debts.
@William
“… “growth” from excessive public consumption” is not “what got us in this mess”.
I advocate investment in transport, infrastructure and manufacturing – I always have done. I have NEVER advocated growth from excessive public comsumption and never have. I say the QE hose is being pointed in the wrong direction – at the banks rather than at the real economy to create real wealth creating real goods and services in order to build wealth from real wages, not debt from dodgy mortgages and the credit default swaps and collatrised debt obligations that largely arose from both cheap money and a pumped up housing bubble. Almost all recessions have that common denominator; a real estate and housing bubble that blew up.
Debt was a great way to boost the economy while keeping wages low; the economy could be driven by peole going into debt in order to buy cars, houses, computers and washing machines – comsume! Buy then on cheap credit and keep the game going for as long as possible.
That needs to change! We need spectacular investment in avtually creating things that can be sold to create real wealth.
As I said, we need to create real wealth, not financially-driven ponzi wealth!
I anyone disagreeing?
It sounds like you’re advocating Green QE – pretty much invented on this blog