Monday, 24 November 2008

Pre-budget report: predictions

I have carried out a brief survey of some of the main UK broadsheets and their predictions about the pre-budget report. A consensus is emerging today (Monday) but Sunday's papers are a bit more diverse:



Newspaper Prediction Recommendation  
BBC (Nick Robinson)
Friday 21st
1% of GDP (£15bn) fiscal boost: deferring tax rises on cars, small business and income tax; tax cuts for the lower paid; bring forward government spending
BBC (Robert Peston)
Friday 21st
Deferred VAT rise to 22.5% in a couple of years
Observer
Sunday 23rd
VAT reduced to 15% Big tax cuts on low paid, rises on high earners; extra tax on bonuses
Sunday Times
Sunday 23rd
2.5% VAT cut; extend £120 income tax rebate; defer road tax and corporation tax rises; three months grace on repossessions; increase public capital spending; expand SFLGS Increase support for manufacturing
Sunday Telegraph
Sunday 23rd
2.5% VAT cut; reduce empty buildings tax
FT
Monday 24th
Income tax increase to 45% over £150,000; public spending cuts outside education and health; temporary VAT cut to 15% Fiscal boost is important; Tories' insistence on funding the tax cuts is risky
Daily Telegraph
Monday 24th
2.5% VAT cut; NI reduction; defer small company corporation tax rise; reduction in motoring taxes; public spending increase Increase income tax allowances; possibly reduce stamp duty; reduce corporation tax from 28% to 25%
Guardian
Monday 24th
2.5% VAT cut; future increase in income tax on £150,000 earners; give businesses more time to pay tax Lower interest rates; controls on borrowing to reduce debt in the economy


Clearly the VAT cut is the main consensus and is expected to be introduced almost immediately, and to last for a year. Other actions have either been leaked consistently or the papers are all following each other and reporting the same things. But there is a bit of diversity in the opinion pages, with some insisting that redistribution is important, others wanting private debt discouraged, and some bemoaning the running of deficits in general.

Few of the papers explicitly discuss how Darling will restore credibility in the UK's fiscal rectitude. As I have written elsewhere, my proposal is to adopt the eurozone targets - deficits no greater than 3% of GDP, and public debt no more than 60% (perhaps with adjustments to reflect the 'golden rule' of no net spending except for investment, as used until recently). Technically, the UK is already subject to these rules, having signed the Maastricht treaty, but as it remains outside of the euro there is little attempt to enforce them.

A future rise in income tax to 45% on high earners is clearly intended as a step towards fiscal balance, but is not substantial enough to make a real impact on a £60-120bn deficit. The temporary nature of the VAT cut helps too, and the cutbacks in public spending from 2010 onwards; but if credibility is to be acquired by proposing specific future taxes, they'll need to give more detail than that.

1 comment:

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