The Red Box

A day late I know but just like George, Osborne that is the Chancellor of the Exchequer I have been a bit busy.

The Chancellor yesterday came to the dispatch box and delivered his first Budget address to Parliament and indeed the Nation. Throughout his 55 minute address he sipped on his water 3 times and banged on the dispatch box 85 times he announced cuts in public spending freezes on civil servants pay over £21,000 and he talked about tax yes TAX.

The Personal Allowance is to increase by £1,000 in April 2011 from £6,475 to £7,645 leading to an additional £200 in each tax payer’s pocket, and at the same time removing 880,000 people from the tax system.

VAT is to increase from 17.5% to 20% on the 4th January 2011, it is anticipated that this increase will raise an additional £13 Billion pounds which will certainly help reduce the deficit. All though this has come as a shock many commentators were predicting a rise of anything up to 22%. It is somewhat of a relief to discover that only the standard rate of VAT has been raised, as prior to the announcement there was speculation that Reduced Rate 5% and the Zero Rate may have been altered.
Although I appreciate that the increase is unwelcome we still have a moderately low VAT rate compared to other countries in the EU such as Sweden 25% and Ireland 21%, however Spain rate is 16%.

It is also worth remembering that Zero rate is applied to Food Children’s clothes and newspapers and fuel is charged at the Reduced Rate of 5%.

Capital Gains tax again there was much speculation within the media that the tax charged on the disposal of such assets as share portfolios and secondary homes could rise from 18% to anything up 40%. Thankfully the Chancellor acted in my opinion appropriately by raising the rate to 28% for higher rate tax payers and maintaining the rate for basic rate tax payers at 18%.

So much occurred in this announcement not only the tax implications but there were also the cuts in public spending, one of the most sensational newspaper headlines focus on the cuts on Tax Credits for people earning in excess of £40,000, although it was confirmed that the poorest would receive an additional £150.

The Chancellor anticipates that the average house hold will suffer by £400 even though the 10% poorest people will suffer £200 this is in contrast to the richest who are expected to suffer in the sum of £1,800.

George Osborne described this budget as progressive and necessary.
This budget will be known as the Tax & Axe budget, but the question for all of us how did we get in this situation and is this the correct way of solving it.
Take this thought with you, the only person permitted to take refreshment in the chamber is the Chancellor when presenting the Budget Denis Healy drank Brandy and Water, Nigel Lawson drank a wine Spritzer, Gordon Brown ....Water ....(always the prudent chancellor!!)