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Budget review - The Chancellor Spends a Penny

Posted by jdavis on March 23, 2011

I am referring, in the Subject, to the reduction in fuel duty.


So, what are the highlights that are material?:

  • Annual borrowings (Deficit) falling from this year £146Bns to £29Bns by 2015/16 ie we add further £514 Bns in borrowing from this year to 2015/16, meaning our Debt rises up to 71% of GDP and remains around that level for a few years.  This, of course, assumes, our borrowing interest rate does not rise.  This is probably a reasonable assumption until the next election in 2015.  After that, all other things being equal, rates could well rise as they have across Europe.  In this scenario, not only will mortgage and business loan rates rise but public sector spending will fall again.
  • GDP rate growth falls for years.  Tell us something we didn’t know.  The recovery is extremely anaemic given the vast amount borrowed and pumped in.  This tells us the economy is in dire straits and needs borrowings (shot in the arm of steroids) to keep it going.  Alarm bells should be ringing in the media but, of course, it is not.
  • He wants the City to remain a world leading centre for financial services.  In other words he’ll do nothing to reform the bankrupt industry that saps our economic strength, over time.
  • Tax relief on Enterprise Investment Schemes will move to from 20% to 30% to be in line with Venture Capital Trusts.  On the face of it, I still prefer VCTs are they are diversified portfolios, unless the EIS creators come up with particularly low risk opportunities.
  • 43 tax reliefs to be abolished, which means there’s only about 1000 remaining…
  • Merging income tax with NI will probably lead to eventual downward pressure on the merged rate (as people will suddenly wake and realise how much tax we pay)
  • If deceaseds’ estates, in future, leave at least 10% to charity then IHT will fall to 36%.
  • Big rises planned in Income Tax personal allowances.  This takes millions out of tax. Brilliant – makes work pay and takes people off the dole
  • Loans to 1st time buyers to get them the deposit so they can take on a large debt…  Will help to slow the falls in prices but is a gimmick and unlikely to create change in trend as the down forces are so strong.  Good for sellers (short term), terrible for buyers who will be sucked in etc


You may be interested to listen to this interview I had with Vanessa Feltz on BBC Radio London this morning at 9.45am about the economy and where we’ve come from and where we’re going.

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