Budget 2 date set for 22 June
The Treasury has confirmed that newly appointed chancellor George Osborne will present his emergency Budget on Tuesday 22 June, less than six weeks after taking power.
The new chancellor made the announcement in his first Treasury press conference
Moving quickly, Osborne said the OBR would be an independent entity like the
Monetary Policy Committee that would be responsible for developing "a
truly independent assessment of the state of the nation’s finances". The
OBR will be set up initially on a non-statutory basis and be headed by
economist Sir Alan Budd. Along with Geoffrey Dicks and Graham Parker he will
form a Budget Responsibility Committee and get to work on the forecasts
immediately.
The OBR will be put on a statutory footing in next week's Queen’s speech.
For each subsequent Budget and Pre-Budget Report the OBR will confirm whether
the government’s policy has a better than 50% chance of achieving its
objectives.
Explaining his reasons for the move, Osborne said: "Over the last 13
years the public and the markets have completely lost confidence in government
economic forecasts. The last government's forecasts for growth in the economy,
over the past ten years, have on average been out by £13bn. Their forecasts of
the budget deficit three years ahead have on average been out by £40bn."
Previous chancellors rather than independent officials were responsible for
the forecasts and fell victim to the temptation to "fiddle the
figures" by nudging up growth forecasts and reducing borrowing figures to
get the numbers to add up, he argued. The government would still set overall
fiscal goals and tax and spending policies, but to rebuild public trust,
independent forecasts will become the norm, he added.
"I am the first chancellor to remove the temptation to fiddle the
figures by giving up control over the economic and fiscal forecast. I recognise
that this will create a rod for my back down the line, and for the backs of
future chancellors. That is the whole point. We need to fix the budget to fit
the figures, not fix the figures to fit the budget."
With the £160bn+ deficit uppermost in his mind, Osborne said Treasury
assessments confirmed it would be feasible to put £6bn of reductions in place
for this year without damaging frontline services. Departmental secretaries
have been told to resubmit all their pilot schemes and spending plans approved
since 1 January to the Treasury. Those that give good value for money and fit
the government's priorities will go ahead, but no more money will be wasted on
those that do not.
The emergency Budget will set out the fiscal path and will contain measures
to boost enterprise, create a fairer tax system, and demonstrate to the world
that Britain
The actual content of the 2010 Budget Mark Two will provide plenty of scope
for speculation and interpretation among accountants. Last week, Simon Sweetman
put forward the following contenders:
VAT will
go up to 20% - it's fast and would raise lots of money. At the Treasury
press conference, prime minister David Cameron said it was "not
something we plan to do" but added that taxpayers would have to
"wait for the first Budget" to find out if it would happen The main
rate of CT will be cut (possibly with the abolition of the small
companies' rate and of the annual investment allowance to pay for it) Increase
in the rate of CGT on non-business assets - possibly from the day of
the Budget. Tax editor Rebecca Benneyworth anticipates the change due to
concerns about the current 32% differential between CGT and the new 50%
upper-band for income tax, which makes it tempting for high earners to
shift their income into capital Employees'
NIC will go up, but not employers' NIC The
personal income tax allowance will increase in the general direction of
£10,000 The
increase in the IHT nil-rate band won't happen The leftovers hanging around from Alistair Darling's 23 March Budget include
the dealing with agents – deliberate wrongdoing legislation. Consultation was
extended on the draft clauses until 28 April. The new government has shown
itself to be sympathetic to the profession's concerns. But even with two former
PwC employees on the Treasury team, there has been no word yet what view they
have taken on this.
While the Tories have fulfilled their pre-election promise to create the
OBR, there is no news yet about the planned Office of Tax Simplification (OTS)
and its review of small company taxation and IR35. Osborne said he would
provide a further update on his activities in a speech to the CBI on Wednesday,
or perhaps the OTS might be a surprise he's saving for the accounting community
until 22 June.
As far as symbols go, Osborne has reverted to the more traditional choice of
a Tuesday to present his statement, after Gordon Brown opted for Wednesdays
early in his period as chancellor.
For the second time this spring AccountingWEB.co.uk will on hand with our
Budget coverage; you can prepare for the new government's tax changes by
consulting the following of our market-leading Budget service:
Budget
2010 previews and coverage Budget
discussion group Live,
interactive commentary on Budget speech and announcements At-a-glance
email bulletin summarising the key measures on the 23rd Detailed technical follow-ups by our expert
correspondents
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