So it’s official – there is a new Chancellor installed at 11 Downing Street. George Osborne replaced his Darling Labour predecessor. What will be the difference to ordinary folk across Northern Ireland and the rest of the UK?
First point to make is that the April Budget we had was always a bit of a sham. Even if Labour had remained in government there would have been a second 2010 Budget. Basically this is because the economy is in a mess and Labour feared failure at the polls if they presented a realistic budget. At its simplest the British economy is sick and whoever made up the new government knew that some unpleasant medicine was to be administered.
The Conservatives promised an emergency budget in the first 50 days. I see no sign that the coalition with the LibDems has changed that. So we can expect another budget by the end of June 2010.
We are likely to see a tougher regime on people who claim benefits while able to work, yet refuse work. The Tories have promised support to those who need it, but they will not support those who refuse to do things to make things better.
National Insurance was set to rise from April 2011. If Osborne had his way he wanted to stop that rise altogether. Sitting in government with others means he needs to consider their (alternative) plans. We may see the employer-funded NIC rise abandoned, but sadly employees may still lose some extra NIC from April 2011.This might mean reducing the planned NIC rise, but not abandoning it. Keeping some of the Labour-inspired NIC rise will allow George Osborne to offer tax savings elsewhere.
The LibDems wanted nobody earning less than £10,000 to pay tax. That would have been an expensive promise to deliver. (The current tax-free personal allowance is £6,475.) It seems we can expect to see personal allowances move sharply upwards towards that £10,000 target, but I doubt it will be reached in 2011/12. There will be no change to the present 2010/11 year.
The Tories wanted to raise the limit at which one pays Inheritance Tax on death. It seems this rise may not happen, or may be smaller than planned. This is to provide money in the kitty to pay for other measures more in keeping with Nick Clegg’s plans.
Child Tax Credits have helped a lot of working families put more money on the table to fund family survival and life. They are however a benefit which can help relatively well-off families. In one of the debates Nick Clegg pointed out that even on an MP’s £65,000 salary one could still qualify for some of the credits. That was clearly a ridiculous situation. David Cameron had wanted, therefore, to take the richest 20% of claimants out of the scope of these benefits. He seems to have got his way as the joint statement agreed by the parties says they want to take the richest people out of tax credits.
Capital Gains Tax, currently at 18% looks likely to rise for non-business investments and assets. They are planning to align it more with income – which would mean CGT rates could go back to 40% or thereabouts. This is unlikely to happen before April 2011 so there may be time to sell things now and save yourself some tax.
Air Passenger Duty is to move to being per plane rather than per passenger. This will encourage the airlines to focus on filling seats and so running planes more efficiently.
It has been confirmed that the UK will not join the Euro within the life of this Parliament. How long that life is might be another matter – I will leave that debate to the politicians!
We will know some of the detailed tax and benefits measures after the emergency Budget which is expected by the end of June 2010.
As for public expenditure cuts we have to expect that Northern Ireland will bear its fair share of those. They have to happen and all the UK will suffer. After some pain we can look forward to a growing and thriving economy.
Adrian Huston, a former tax inspector, is a director of Belfast tax and accountancy firm Huston & Co – www.huston.tv