A budget for …. recovery?

Today’s budget seems to have some limited good news.

First, if there’s to be a real economic recovery, it needs to be generated by productive business.  Reductions in corporation tax and jobs tax are the best things a budget can offer, and it has done exactly that.  If the chancellor’s colleagues can match it with reductions in red tape, we’ll have an improvement.  On the other hand, it introduces new perverse incentives, such as the substantial concession to new businesses vs equivalent existing ones.

The other slightly-good news is the signal on housing benefit.  If they can gradually bring it down, it’ll help rents fall for the priced out, who struggle to compete and often have to make do with homes unfit for ‘social housing’.  That in turn will reduce yields for property pimps.  On the other hand (and it’s a big one), he’s done nothing to discourage hoarders, and encourage owners of empty properties to bring them onto the market either for sale or to let.

VAT up in January, timed for the anniversary of the last rise so it won’t make a sudden difference to published inflation rates.  No change to the absurd policy of tying bank interest rates to a meaningless price index, though that could itself prove interesting as China – whose cheap manufacturing has been perhaps the single biggest influence for a decade – changes.

What else?  Oh, right, a climbdown on CGT, to hand freebies to the idle rich – albeit moderated by the reduction in the public housing trough.  And a dual rate that might encourage some working rich to take a reduced income for a year in which they take big capital gains.  New complexity, new loopholes, new perverse incentives.

A disappointing lack of ‘green’ measures, though the hint of a change in airline tax might be a small positive.

Now we await the spending review ….

Posted on June 22, 2010, in politics, tax, uk. Bookmark the permalink. Leave a comment.

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