Post-Budget 2017: A Few Comments

The highlights of today’s budget were neither high nor light, but the budget did effectively do what, politically, it should have done: as little as possible. It was merely sensible. The objectives: attract the youth, make a noise about housing, give money to the NHS. For an embattled government, Mr Hammond’s speech will be generally welcomed.

The Big Issue was in relation to housing and his amendments to Stamp Duty Land Tax (first-time buyer exemption for properties below £300,000 and the first £300,000 on properties priced up to £500,000) will attract younger voters, as will the extension of railcards up to the age of 30. Of course the fiscal impact is to focus ever more burden on those in their mid-years (31 to 65) who are expected to carry the entire weight of the economy on their shoulders. But this mid-range is not what the Chancellor sees as his target for favours.

Continue reading “Post-Budget 2017: A Few Comments”

Pre-Budget 2017: No Direction Home

Another Budget: another opportunity to criticise government. Inevitably some will pay more to, or get less from, government. The Press have predetermined that this is a “make or break” Budget for Mr Hammond who must try to fit a large square peg into an impossibly small, round hole. 

He has to meet the popular expectation of entitlement and an even stronger belief that someone else should pick up the tab. Yet, this same population has also set a course into unchartered waters known as Brexit. Continue reading “Pre-Budget 2017: No Direction Home”

Out of the jaws of victory she snatched defeat

There can be little doubt that we have just witnessed a historically bad performance by the incumbent government, not quite a defeat for Mrs May, but a resounding discord from the people of the UK, for the second time in a year telling politicians that they cannot take for granted the views of the people.

I have heard it said that it was a choice between austerity and less state intervention on the one hand juxtaposed with big state and big spending on the other. I doubt it is that simple.  Mrs May is, as I write, off to the Palace to propose her new government, but we should not think for a second that her policy is one of shrinking government.  That is not an option for any government anymore, and with such a marginal position, we face a period of mediocrity in terms of government policy. That is what we voted for and what we will get. Continue reading “Out of the jaws of victory she snatched defeat”

M’aidez, May Day

Having no political affiliation provides me with the space to criticise everyone, and there is much to criticise in our politicians. It must be very difficult to try to behave in a principled manner, while being dependent on the popular vote. Doubtless that is the reason why principles are so often lacking in democracy (except the principle that someone else is always to blame). The assumption that underpins democracy is that the voters will, overall, behave in a principled and intelligent manner. We can see, perhaps, why life for a politician is complicated.

At the eve of a general election, it is interesting to ponder that the whole idea of democracy is that voters hear all the arguments and vote in their own best interest. The Invisible Hand which Adam Smith identified as underpinning capitalism should then act to give the best solution for the voters as a whole. Continue reading “M’aidez, May Day”

The George Giveth, the Phil Taketh Away

Houses of Parliament

“Anti-Entrepreneur” was the first thought that entered my head, as I wondered why the Chancellor seeks to direct his tax-hoover exclusively on those whose industry underpins the greatest wealth in the UK. Then the light-bulb shone: it is politically expedient, playing to the gallery of those who are jealous, while economically, it is safe to attack entrepreneurs because they don’t complain, and cannot go on strike; they just don’t have the time.

There really wasn’t much in the speech, and the detail will emerge as the economists and tax specialists wade through the government press releases.  Our own Ian Abrey will be releasing his more technical analysis shortly, but for most business people the budget involved two sections:

  • There was the bit by which entrepreneurs and small businesses were abused, and,
  • There was another bit by which the Treasury will work out how they can abuse them more.

Entrepreneurs are the low-hanging fruit – they are just too busy working 24 hours a day to complain.  Perhaps this explains the comment that 1% of the population pays 27% of the income tax, since it is clear where the votes lie. But it does not sound like that 1% are under-contributing to me.

Compared to previous Budgets, the Chancellor was witty, for sure, and did not spend the first half-hour congratulating himself. Maybe he had his reasons. Nor did he mention Brexit, peculiarly. Much of the budget revolved around wider government policy, such as education, and I had to smirk when he indicated that after the Polytechnics were sprinkled with holy water and turned into Universities some years ago now, the trend has now gone full circle, along with rebirth of Grammar Schools and Technical Colleges. When will politicians learn to leave education (and all the professions) alone? Those involved in education may be happy to see £216m being made available for 110 new free schools – though that is less than £2m per school.

The Chancellor wants to tackle tax avoidance. How better than to turn his cannon against VAT on roaming charges and moving fixed assets into stock – matters with which no-one will be familiar. He will continue his attack on those who enable tax avoidance, and we wait to hear exactly how he defines his terms. I recall being lectured by a professional body in 2006 that we could be negligent if we failed to offer tax avoidance schemes.  We never did, but it shows how inconsistent governments can be when faced with public opinion.

Apparently the self-employed get too good a deal. He deftly ignored the down-sides of being self-employed (no holiday pay, sick pay or job security). The previous Chancellor helped them by scrapping Class 2 NIC’s. Although the real blows will be released while we are all on holiday in the summer, the taster for now is that NIC’s for self-employed people are going up 2% over 2 years. In one brilliant blow, the Chancellor will upset millions of self-employed people, for a total tax take of £140m.

All UK companies were looking forward to seeing their corporation tax rates fall, and this will not change, it seems.  What will change is that small businesses (usually entrepreneurs), who saw last year the rate of tax on their dividends go up as the tax credit regime was abolished, will now suffer more tax on their dividends. Once again the tax take will be small and the upset caused will be enormous.

Making Tax Digital (“MTD”) is supposed to be tax neutral. How then did the Chancellor conclude that deferring the entry of businesses below the VAT threshold into the MTD regime by 12 months will cost the Exchequer £180m? Do I detect some flying pork pies?

Business rates are the big headlines at present, and a package of reliefs was offered for small businesses to do very little but make it look like government was addressing the situation, especially for everyone’s favourite local pub. As for larger businesses and how to address the virtual business economy: the government will think about it and take soundings.

Other things the government will think about are simplification of Research and Development claims and the burning issue of North Sea Oil Revenues (don’t they belong to Scotland?).

An Initial Conclusion

The achievements so far and the objectives are laudable: we have a fast growing economy with low unemployment and inflation forecast at around 2%. Yet our borrowing is £1.7 trillion. Because governments do not produce balance sheets, only income and expenditure accounts, it’s hard to see what assets are backing that up. However, the Government says it wants to build productivity and infrastructure, delivering fairness.

Yet the reality is that Government is increasing the burden of small and medium sized businesses, imposing higher effective taxes, massively increased administrative burdens through MTD and auto-enrolment, while effectively subsidising larger employers by supplementing salary costs with in-work benefits and credits, and thus distorting the unemployment figures.

Government’s words are all about developing the economy and encouraging growth, but its actions are more about restriction, control and red-tape, welcoming us back to the 1970’s.  How ironic that the squeeze on taxes and increased red-tape reminds me of the decade when we entered what is now called the EU.

There is a saving grace: at least the Chancellor did not do very much at all.

The Lunatics are on the Grass


“The lunatics are in my hall
“The papers hold their folded faces to the floor
“And every day, the paper-boy brings more” (Pink Floyd, Brain Damage)

More than forty years after Pink Floyd released “Dark Side of the Moon”, the lunacy continues and only the faces in the photos have changed.  Each day, I read the newspapers with increasing concern.  Is it old age?  Or am I right to be so stunned that I struggle to find the coherent thread that links the stories? And so I decided to explore that link.

Continue reading “The Lunatics are on the Grass”