George Osborne delivered a politically adept speech against a
backdrop of grim economic news, introducing tax cuts for business,
a boost for home buyers and help for the 'squeezed middle'
at a net cost of £140m, avoiding the cardinal sin of
increasing net borrowing.
The OBR was quoted extensively with downward revisions in near
term growth forecasts, with rosier projections two to three years
out, a pattern established over successive budgets. Today's
Matt Cartoon, takes a humorous look at the forecast credibility
There was a rabbit out of the hat with a forecast improvement in
deficit reduction, now down by a third, although borrowing in 2013
will be the same as last year. However, in 2010 the Chancellor
predicted the deficit would be down to £20bn by 2015, it is
now forecast to be £96bn, almost five times as much. This
means the national debt will keep rising well beyond this
Parliament reaching £25,000 per head or circa £1.2trn
before it begins to trend down. A pretty dire state of affairs.
With no reduction in prospect for absolute debt until post 2018,
the possibility of the 'Standstill decade' is looming
Bringing debt down against this backdrop is storing up a mighty
difficult feat with so many parts of government expenditure such as
health and education protected from cuts. Investors are not
punishing the Chancellor for the moment, but more bad news will
surely see the bond markets begin to question Britain's Safe
In my pre budget blog I predicted a focus on Trade, Tax and
Transparency and given the acres of budget coverage, I will focus
commentary on these three areas.
Business will have been cheered by the further reduction in
corporation tax, national insurance reductions, and the AIM
exemption from Stamp Duty. In terms of trade this should encourage
more international business to locate in the UK, although these
attractions have been tempered by the assault on multi national
corporations over their tax affairs.
The budget did very little for exports and will not help the UK
trade its way out of the current malaise. Banks were hit again and
given that the financial services trade surplus is greater than all
other sectors combined, the temptation to play to the gallery
proved too strong. The Chancellor has clearly been told by his
advisers that there are no votes in supporting Britain's
leading export industry.
On tax the 1% reduction in corporation tax produced the lowest
rate of any major nation, and completed the reform set in train in
2010. Were it not for the uncertainty around GAAR, tax avoidance
and significant other indirect taxes such as national insurance and
business rates, this could have had a big impact.
I fear it will not, as international business sees that for
every £1 in corporation tax, business pays another £2
in indirect taxes, with multi national corporations publicly
pilloried for not paying more.
The move to a £10,000 personal allowance in 2014,
childcare help, a token reduction in beer duty, and the
£130bn Home Buying boost, were clearly the beginnings of an
election 2015 strategy, aimed at wooing Middle England.
Overall, the budget is fiscally neutral so there will not be too
much impact on growth, especially in the near term.
The expected measures to strengthen the fight against tax
evasion materialised with the three Crown Dependencies all having
indicated a willingness to enter into automatic information
exchange on UK residents. The OTs and the G8 next.
The Chancellor claimed a benefit of £1bn over 5 years or
£200m per annum, frankly akin to searching the back of the
sofa for small change in the overall scheme of things. In reality,
a relatively modest balancing item to fund giveaways without
What does this mean for Jersey? It could mean very little or a
great deal, depending on how these agreements are concluded, and
whether we see the emergence of a level playing field.
More here on the implications of UK FATCA.
The crucial point here is whether Jersey has to report at a
level that exceeds the information that the UK would require from
its own residents. The most sensitive population will be the non
doms, who have lived in the UK for up to seven years, or are
claiming the remittance basis of taxation through paying an annual
This group will generally only report value held in the UK
together with remittances, and Jersey should not agree to data
collection on this group that exceeds these requirements. Nor
should it accede to pressure from other countries to enter into
automatic information exchange until and if it becomes a global
Provided these principles are observed, the addressing of any
small legacy problem on non disclosure by tax evaders is
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