budget 2010 LDP
Inside our Budget special:
■ Speech that sets the tone for the election campaign: Page 3 ■ How the Budget will affect you and your family: Pages 4-5
www.ldpbusiness.co.uk
Darling hits rich with stamp duty rise by Rob Merrick
LDP POLITICAL CORRESPONDENT news@liverpool.com
CHANCELLOR Alistair Darling punished the wealthy with a tax hike on £1m-plus house sales yesterday, as he insisted only Labour could be trusted with an economy “at a crossroads”. In a nakedly political Budget, Mr Darling unveiled a £2.5bn “growth package” – for small businesses, the jobless, pensioners and housebuyers – insisting spending must continue rising until recovery was locked in. With the general election likely to be just six weeks away, the Chancellor urged voters not to risk that recovery on a Conservative party hell-bent on immediate cuts that would be “wrong and dangerous”. And he told the Commons: “I am not prepared to take that risk. We have worked too hard as a country to come through this recession to throw it away now.” Mr Darling also announced eye-catching measures to free many firms from paying business rates, an extra 20,000 university places and doubled the stamp duty holiday for first-time buyers, to £250,000. And he promised to shift 15,000 Civil Service jobs out of London over the next five years – and a further 13,000 “in the long term” – to areas such as Merseyside. But, in a Budget also designed to calm the jittery financial markets, he
published details of £11bn of planned savings, to answer criticism that the Government is hiding the painful cuts to come from 2011. The “efficiencies” are startling at health (£4.35bn) and education (£1.1bn) and the detail vague, with talk of cutting staff sickness and consultancy costs. That will raise questions about how ministers can “protect front-line services”, as promised. In a passionate response, Conservative leader David Cameron insisted the Chancellor was still failing to deliver a “credible plan to deal with Britain’s record debts”. And he told MPs: “Like every Labour government before them, they’ve run out of money. And they’re leaving it to the next Conservative government to clean up the mess.” Mr Cameron also taunted Mr Darling that the stamp duty cut for first-time buyers had been stolen from the Tories – as had the announcement of tax hikes on super-strength cider. Lib-Dem leader Nick Clegg said both Labour and the Conservatives were “in denial" about spending cuts, adding: “This Budget was a political dodge, not an economic plan.” The Tories were also quick to point out that personal allowances had been frozen, instead of rising in line with inflation, in a classic “stealth tax” that leave the average taxpayer up to £40 worse off. Confirming reports of a £2bn “green
‘We have worked too hard to throw away recovery’
■ Small firms welcome pledges – but doubts remain on detail: Page 6 ■ Visit our website for all the latest Budget reaction www.ldpbusiness.co.uk
Nakedly political Budget – Alistair Darling in traditional pose in Downing Street yesterday Picture: FIONA HANSON infrastructure fund”, Mr Darling said the first projects to benefit would be in transport and offshore wind power, where Britain was “already a world leader”. In an announcement likely to interest the Port of Liverpool, he set up a £60m fund to develop ports keen to host companies making and assem-
bling wind turbines. Mr Darling also cheered motorists by staging a planned 3p increase in fuel duty over ten months, with only a 1p hike from next month. He cut his borrowing figure for 2010-11 by £13bn, to £167bn – but net debt is still forecast to rise to an eye-watering 75% of GDP in 2014-15.
Banks pledge an extra £94bn for small businesses PART-NATIONALISED banks have pledged £94bn in extra loans for struggling businesses in the coming year, the Chancellor said yesterday. Alistair Darling said Royal Bank of Scotland and Lloyds Banking Group have agreed to lend nearly half the total
amount to smaller companies. RBS, which is 84% taxpayer-owned, said its deal with the Government involved extending £50bn in gross lending to firms. Lloyds has agreed to lend £44bn to firms in the coming year under the new agreement.
Last year, the banks missed their required business lending levels as recession-hit customers looked to repay debt. Lloyds’ target will remain at £3bn for the coming year, while RBS has seen its commitment reduce to £8bn, as the target was balanced over
two years after the 2009 level was increased from £9bn to £10bn. The Budget document said the new agreements were legally binding but stopped short of outlining specific penalties if the banks failed to comply. It said if the banks were judged
not to have met their targets, UK Financial Investments (UKFI) – the body charged with managing Government banking stakes – would “work with the remuneration committees of the relevant banks to determine the appropriate consequences”.
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Thursday, March 25, 2010
LDP budget 2010
Election Budget gives Package for businesses BUSINESS leaders welcomed a series of Budget measures aimed at boosting smaller firms, including a cut in rates and more Government contracts, but voiced dismay that an increase in National Insurance Contributions (NICs) will not be reversed. The Chancellor announced that an extra 15% of central government contracts will go to smaller firms, which could mean up to £15bn of new business across the whole of the public sector. He added that business rates will be cut for one year from October, meaning
a tax reduction for over 500,000 small businesses in England, and said there will be no increase in the minimum rate of capital gains tax. Lower taxes, extra work and more time to pay bills would help thousands of small businesses, which will provide the “backbone” of the UK’s future economic growth and job creation, Mr Darling said. The Federation of Small Businesses welcomed the help for small businesses, but said it was disappointed that the Chancellor was pressing ahead with the proposed hike in NICs.
No cheer for drinkers THE Chancellor announced duty on beer, wine and spirits will increase as planned from midnight on Sunday. Alcohol duties will also increase by 2% above inflation for two further years from 2013. Tax on cider will increase by 10% above inflation from midnight on Sunday – a move slammed by West Country band The Wurzels, famed for their hit, I Am A Cider Drinker. The Government also raised duty by 1% above inflation and said it would increase it by 2% in real terms each year until 2014. The alcohol price rises
were criticised by campaign groups. British Beer and Pub Association chief executive Brigid Simmonds said: “Since 2008, beer tax has increased by an eye-watering 26% – a £761m tax rise – and we have seen the loss of 4,000 pubs and over 40,000 jobs up and down the country.” Campaign for Real Ale chief executive Mike Benner said: “The Budget is a charter for the large supermarkets who irresponsibly promote alcohol as a loss leader at the expense of our nation’s community pubs, real ale and responsible pub goers.”
Good news for drivers? ALISTAIR DARLING took pity on motorists by introducing his 3p a litre fuel rise, planned for April 1, in three stages. With prices at the pumps already approaching record levels, Mr Darling said he wanted to “ease the pressure on family incomes”. He decided the rise would be 1p in April, with a further 1p rise in October and the final 1p increase coming in January, 2011. AA president Edmund King said: “Drivers’ relief at the Chancellor not raising fuel duty by the full 3p can be measured by the tankful.
“Had the full increase gone ahead, it would have added £1.50 to the typical cost of refilling a petrol or diesel car, or £37.50 a year. For a family with two petrol cars, that alone would have been four times the average increase in council tax for this coming year.” Many roads are deeply potholed following the severe winter weather. Mr Darling said he was providing £100m for local authorities to repair roads and £285m for improvements to motorways, including schemes to allow motorists to drive on the hard shoulder at peak times.
Campaign speech or financial statement? – Alistair Darling, centre, with Prime Minister Gordon Brown and Leader of the House of Commons Harriet Harman
Inheritance ‘stealth tax’ INCREASING numbers of families will be caught in the inheritance tax net after the Government announced plans to freeze the threshold at which the tax kicks in. Chancellor Alistair Darling said the threshold would be held at £325,000 for the coming four years in order to fund the cost of care for the elderly. The move represents a back-track on previous announcements that the threshold would be raised to £350,000. Frank Nash, senior tax partner at accountants Blick Rothenberg, said: “The freezing of the inher-
itance tax nil rate band at £325,000 for the life of probably the next Parliament will gradually bring more homeowners into the grasp of inheritance tax. “What this amounts to is a stealth tax on middle England who are being asked to subsidise long-term health care for the nation.” Inheritance tax is charged at 40% on all assets worth more than £325,000 that are left behind when someone dies. KPMG partner David Kilshaw said: “By freezing the nil rate band, the Chancellor has put the teeth back into inheritance tax.”
More cash for parents PARENTS of children aged between one and two will get an extra £200 a year per child as part of family-friendly Budget measures announced yesterday. Work and Pensions Secretary Yvette Cooper said the “Toddler Tax Credit” would go to 885,000 families earning less than £50,000 a year. And she also unveiled a benefit boost, worth up to £56 a week, for grandparents and other family “unsung heroes” who look after children “at times of family difficulty”. Payments made by local councils for “kinship care” will no longer be
counted against their claims for housing and council tax benefit. Both changes will be paid for by £200m savings the Department for Work and Pensions aims to realise through automating benefit processing and reducing accidental overpayments. “This toddler tax credit gives parents more help and choice when they need it most,” Ms Cooper said, detailing the change. “It will give families with young children an extra £200 a year in their pockets at a time when many parents want to stay at home or work part-time.”
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Thursday, March 25, 2010
LDP budget 2010
Labour cause to cheer Alistair Darling left clear blue water between his party and the Tories, says Rob Merrick IT WAS less the last Budget speech of the Parliament – and more the first speech of the general election campaign, now just two weeks away. And, what’s more, Labour MPs left the Commons chamber believing it might just be the hour-long oration to pull off a shock polling day comeback. Before he got to his feet, Alistair Darling’s task was to somehow convince the City he has a plan to restore the nation’s battered finances, while also giving voters something worth walking to the ballot box for. The omens were terrible. The Chancellor gave his own speech the advanced billing of “workmanlike” – scarcely a word to fire enthusiasm – while all his previous Budgets have sent Labour dipping in the polls. But Labour MPs found themselves with plenty to cheer – the stamp duty hike for millionaires delivering a classic dividing line with a Tory party pledged to axe their inheritance tax. Mr Darling’s tax-evasion deal with Belize may prove to be something or nothing, but, as a device to rouse the Labour troops – in fury over the “non-dom” Lord Ashcroft – it was a belter. Of course, the Chancellor has still failed to properly explain how he will halve the budget deficit in just four years, the most painful spending squeeze in history. That’s why it will be branded a “phoney Budget” (as it was by Lord Lamont yesterday) – and why it was more a campaign speech than a financial statement. But that is less a problem for Labour than for the Conservatives, who have pledged to cut further and faster, but revealed even less of that detail. The other key election battle is equally clear. Mr Darling called government a “force for good”, while the Conservatives want to roll back the state. There is the clear choice for voters.
Alistair Darling holds up his ministerial red box outside 11 Downing Street, before heading to the Commons
Conservative leader David Cameron responds to the Budget
Picture: SANG TAN
The Wurzels – criticised yesterday’s 10% tax rise on cider
Bank accounts for all
Green investment
ISA plans for savers
EVERYONE will be guaranteed access to a basic bank account under plans announced in yesterday’s Budget. Chancellor Alistair Darling said the move would lead to up to 1m more people having access to bank accounts during the coming five years. There are currently around 1.75m adults who do not have a transactional bank account, more than half of whom are among the poorest fifth of the population, according to a Treasury task force. But the banking industry said it already offered
A NEW green investment bank was unveiled yesterday in a bid to stimulate billions of pounds of private finance for low-carbon industries such as offshore wind farms. Chancellor Alistair Darling said the new bank would control £2bn in assets and “unlock billions more” from the private sector for green energy and transport development. Investment will focus in particular towards offshore wind energy “where Britain is already the world leader” he said, with £60m going to develop ports which will be the site of
SAVERS received some rare good news yesterday when the Chancellor announced plans to increase the annual ISA allowance in line with inflation each year. The Government has already announced plans to raise the amount people can save tax-free each year from £7,200 to £10,200, of which £5,100 can be held in cash. The new threshold comes into force from the beginning of the new tax year on April 6 for all savers, with those aged over 50 already benefiting. Alistair Darling said the annual allowance would
everyone access to a basic bank account. Basic accounts enable people to receive credits, such as wages or benefits, while they can be used to set up direct debits and some accounts also come with a debit card. But they do not offer a cheque book or overdraft facility, although some accounts have a £10 buffer zone. All of the major banks offer the accounts, which can be opened by anyone who can prove their identity. The number of unbanked households fell from 3.57m in 2003/04 to 1.75m in 2007/08.
turbine manufacturing. Half the £2bn would be raised from the sale of assets including the Channel Tunnel rail link, while the other half will come from private investment. The Chancellor was responding to calls from the energy industry and environmental campaigners to provide Government support for private investment in low-carbon industries. They hope these measures will encourage companies to put their money into energy efficiency technology and electric vehicles, creating jobs and cutting emissions.
continue to rise in line with inflation each year. Around 19m people currently have an ISA, with savings in the accounts totalling £270bn. Commentators predicted the move would mean ISA allowances would increase by around £1,000 to £11,200 within five years, based on inflation of around 2%. Kevin Mountford, head of banking at Chester’s moneysupermarket.com, said: “Increasing the ISA limit and allowing more people to save more in cash means more flexibility for people when choosing a home for their savings.”
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Thursday, March 25, 2010
LDP budget 2010 Pensioners warm to Mr Darling
Pensioners Nuala and Conal Gallagher, from Cressington Park Picture: JAMES MALONEY/ jm240310budget-3
RETIRED doctors Nuala and Conal Gallagher both live on a state pension, plus their NHS pensions for having worked as GPs during their careers. Both in their eighties, the couple say their first impressions were positive. Dr Nuala Gallagher said the most relevant aspects of yesterday’s Budget for them were the increased support for pensioners through pension credits and winter fuel payments. As the Cressington Park couple are over 80, they stand to receive an extra £400 towards fuel bills.
Tony Reddin, accountant with global accountancy firm Grant Thornton, said in his opinion the couple stood to be slightly better off as a result of the Chancellor’s measures, which, Mr Darling said, would see them entitled to an income of £132 a week. Mr Reddin said: “As personal allowances and tax rates have been frozen, this couple's net income will be broadly neutral compared to last year. “Some good news for them is the increase in the rate of state pension and pension credit entitlement,
which will mean that they will be better off by about £200 per year. “The extension of the winter fuel allowance for a further year will mean that this couple will once again be able to benefit from the £400 annual payment. “The freezing of the Inheritance Tax threshold at £325,000 for the next four years will be a disappointment, but at least they will be able to take advantage of the transferable nil rate band meaning that the first £650,000 of their combined estate will be tax free.” VERDICT: Better off
Mixed blessings for small businesses BUSINESSWOMAN and married mother-of-two Paula Birkett runs a barbers’ shop in Tuebrook. She says the recession has hit her business hard, with custom down by around 40%. Accountancy expert Tony Reddin, of Grant Thornton, said there were mixed blessings for the family in this year’s Budget. Mr Reddin said the family would have around the same net income following the Budget. He added: “There is some positive news for Paula as a result of the incentives that the Government are introducing aimed at helping small and medium sized businesses. “Perhaps most notably, the Government has announced an extension to small business rates relief meaning that business that occupy properties with a rateable value of £12,000 or less will have some form of rates relief. “A further welcome change will be the extension to the time to pay arrangements whereby business can spread the burden of tax, National Insurance and VAT payments over a period of
How the Budget impacts on you Newly-employed will be worse off AFTER 12 months unemployed, 21-year-old city man Jamie Lock has already benefited from the Government’s Future Jobs Fund scheme, aimed at providing work and apprenticeships for 16 - 24-year-olds. He is on a six-month placement at the North Liverpool Regeneration Company, earning the minimum wage, and hopes to continue in the job. The Chancellor announced that the Future Jobs Fund scheme will be extended, but as to whether this year’s Budget will im-
prove his future economic outlook is in question. Grant Thornton accountant Tony Reddin said: “The freezing of the personal allowance and tax rates will mean that, in net pay terms, Jamie will be in the same position as last year. “However, the Chancellor justified maintaining rates and allowances at a time when inflation was at or near zero. “If the cost of living rises as expected over the coming months, Jamie will actually begin to feel worse off.
“The rise in fuel duties will increase his annual motoring costs by about £30 a year, but, as the Chancellor has deferred the previously announced 3% increase over the next 10 months, the full impact of the rise will not be felt immediately. “If Jamie is in a position to save, then he should look to take advantage of the increase in ISA allowances for all taxpayers, meaning he can now contribute up to £5,200 per year to a taxfree saving plan.” VERDICT: Worse off
Jam
Stealth tax hits couple
Hairdresser Paula Birkett – business hit hard Picture: GARETH JONES/ grj220310budget-1
time. While this is to be welcomed, our recent experience suggests that it is more difficult to get HM Revenue and Customs to accept a payment plan. “The Government have also introduced further measures to help struggling businesses with the exten-
sion of the Annual Investment Allowance from £50,000 to £100,000. While this is not likely to help Paula's business directly, it is hoped that this will encourage business investment generally and help stimulate the economy.” VERDICT: Better off
DAVID and Lynsey Lewis live in a town house in Rodney Street, Birkenhead, which they are buying with a mortgage. David, 32, is a health care assistant, while Lynsey, 29, is an office administrator, and their joint family income falls into the £20,000-£30,000 bracket. They have one car, a Suzuki Liana medium sized hatchback. Our expert, Tony Reddin, said of David and Lynsey: “They will find very little change to their circumstances following this Budget. “Their take home pay will remain the same, although as the cost of living rises they will find that the stealth tax of in-
flation will make them feel slightly worse off. “Planned rises to National Insurance from next year will also impact on their income in the future. “Increases in the costs of motoring and socialising will affect them adversely by about £80 per year. “They will, however, be pleased with the extension of the 0% rate of stamp duty on property purchases up to £250,000, meaning that their next step on the housing ladder will be more affordable. Whether this measure stimulates the housing market generally remains to be seen.“ ” VERDICT: Slightly worse off
Lynsey and David Lewis,
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Thursday, March 25, 2010
LDP budget 2010
Child credits benefit single mother
mie Lock
, of Birkenhead
Single mother Layla Hedderick, 25, with her daughter, Ella Picture: JASON ROBERTS/ jr240310budget-1
LAYLA HEDDERICK is 25 and mother of three-year-old Ella. She lives with Ella in rented accommodation in Hoylake Road, Birkenhead, and is studying catering and hospitality at Wirral Metropolitan College. She relies on income support and child benefit and doesn't have a car. "I'd love to have one, but I can't afford it so I walk everywhere," she says. Tony Reddin said: “Layla will benefit
from the increase in child benefits by £15 per year, and will also benefit from the increase in child tax credits by about £120 per year. “Overall, Layla will feel slightly better off following the Budget. “As Layla does not use a car and drinks only occasionally, the rise in the cost of fuel and alcohol duties will not affect her significantly.” VERDICT: Slightly better off
Business anger at increase in the UK minimum wage BUSINESS leaders criticised the Government after it emerged that the minimum wage is to increase by 2.2% to £5.93 an hour. Chancellor Alistair Darling made no mention of the rise in his hour-long speech to the Commons but, in a 228-page Treasury document published afterwards, it was revealed that the adult minimum wage will rise from the current £5.80 an hour in October. “This increase strikes a balance between helping low-paid workers and families, and ensuring that the rise does not damage their employment chances,” said the document. “When increased in October, 2010, the NMW will have risen by over 22% in real terms since the Government introduced it in 1999.” The British Retail Consortium complained that, in a year of continued economic uncertainty, the increase was “irresponsible”. The BRC said it was “excessive”, and at odds with Government promises of prudence and with what was happening to pay generally, with many employers forced to freeze wages to safeguard jobs.
Director-general Stephen Robertson said: “A measure of this magnitude should have been in the Budget speech. This increase is downright irresponsible. It’s at odds with Government promises of prudence and public sector freezes, and will damage retailers’ ability to maintain and create jobs. “How can an increase virtually double last year’s be justified? Economic conditions were far weaker in the run-up to this year’s decision than 12 months earlier. “The BRC supports the principle of the minimum wage, but it’s sheer madness to be forcing new costs on this scale on to retailers and their suppliers.” TUC general secretary Brendan Barber said: “Once again the Low Pay Commission has managed to resist employer calls for a freeze, and has been able to agree a modest increase to the minimum wage rate despite the difficult economic times. This rise will benefit around a million people and will mean an extra £5.20 in the wage packet of a 40-hour per week worker on the minimum wage. This is a relatively modest increase which the evidence shows employers can afford.”
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Thursday, March 25, 2010
LDP budget 2010
Small firms satisfied – but wary of electioneer Chancellor by Neil Hodgson LDP STAFF
neil.hodgson@liverpool.com
THE Chancellor’s 2010 Budget proved a big hit with small business – but doubts remain over the fine detail. Liverpool Chamber of Commerce chief executive Jack Stopforth admitted he was surprised and “quite pleased” to see how much Alistair Darling devoted to the sector. “About a quarter of the time he was on his feet he was talking about small business, and for another quarter he was talking about training. “I was very pleased to see some initiatives, like the suspension of business rates for 12 months. “That caught me from left field somewhat.” He admitted disappointment that plans for a 1% National Insurance increase still remain, but added: “We have a bit of time to work on that. It is such a crude tax on jobs. “I was also disappointed that there was not more recognition of the cost to business of employment legislation.” He welcomed the headline measure of reducing the borrowing requirement by half in four years, but said: “Business will want to know how he is going to achieve that. “Overall, I thought it was a very adept performance. “Just a few weeks from a General Election, I didn’t expect a lot of detail, and he didn’t disappoint us.” Mr Stopforth was part of the LDP
Business Budget panel 2010 that delivered its reaction on a live stream from the business district’s Cross Keys pub. Fellow panellist Carl Cross, from Liverpool stockbroker Rensburg Sheppards, said: “I thought it was a pretty good performance by Alistair Darling, but very short on any kind of information about how he's going to tackle the deficit – some talk about £11bn in efficiency savings, but all Governments have a tendency to say that. “It was inherently very political with the election just six weeks away, but very short on precise detail about how that enormous deficit is going to be addressed – and that's really the big concern.” Panellist Paul Kelly, from the Liverpool office of Parker Kelly Financial Services, admitted his surprise that the Chancellor did not decide to continue the scrappage scheme which saw drivers rewarded for buying new green cars and has been credited with boosting the British automotive industry during the recession. “I was sceptical when it was introduced last year that it would be a success. I was proved wrong. “I wonder why it’s not been continued. It would help the jobs situation and also help the environment by taking old and polluting cars off the road.” Peter Stoney, senior fellow in economics at the University of Liverpool, praised the Chancellor’s encouragement of small businesses.
The LDP Business Budget panel 2010. From left: Carl Cross (Rensburg Sheppards), Paul Kelly (Parker Kelly Financial Services) and Jack Stopforth (Liverpool Chamber of Commerce) “The university innovation link-up is quite a good point and the business rate could well be welcomed by SMEs (Small to Medium-sized Enterprises), although how the suspension of rates is going to impact on the bigger picture is unclear. “The increase in investment allowances is a good thing, as is the investment bank for green energy, so there’s been some specific measures but there will be a moan from SMEs about the 1% National Insurance increase, although that’s not coming in for another year and by then things will be better anyway.” Mr Stoney said the “nudge” to banks to increase business loans to SMEs is another supportive measure. “The overall drift for SMEs was he has gone out of his way to encourage private sector growth,” he added. “But there’s a worry whether his forecasts are correct, which could
impact on SMEs and we won’t know more about that until after the General Election. “He is going to switch out of existing commitments instead of spending more money, but it is not clear how he is going to do it. “It depends on where public expenditure is going to be switched out of. If it is from education, that is not good.” Mr Stoney said the focus on SMEs is sensible as they make up 95% of UK business and will account for most of the business growth, but added: “Whether he has done enough is another matter.” Phil Orford, chief executive of small firms lobby group the Forum of Private Business, worried that the Chancellor had his eye more on the General Election. “While it’s clear the Government has been listening to our messages
about small businesses in the recovery, there’s a sense that the Government is courting the small business vote.” Michael Sale, president of the Liverpool Society of Chartered Accountants, said: “While the focus on jobs and investment is important in the short term, businesses will want to know more about what they can expect in the medium to long term.” And David Antonia, partner at accountants Mitchell Charlesworth, said: “The bright spots for small businesses, which are the growth engines of the economy, are leaving the core capital gains tax rate at 18%; doubling the 10% capital gains tax rate for entrepreneurs to qualifying gains of £2m; and cutting business rates for one year. “However, the true cost of climbing out of this recession will only be felt after the election.”
More reaction from the business sector to Alistair Darling’s 2010 Budget STEPHEN HUNTER, head of tax at KPMG in Liverpool: “There was no radical thinking regarding the taxation of the corporate sector, which is disappointing given that the Chancellor recognised that a key element in repaying the country’s debt will be the growth of the economy, and business is, after all, the engine of that growth.
“We should be thankful that there were no bombshells, however, and there was a small helping of good news for the region's businesses." DAVID COWNIE, senior director in the professional team at property agents CB Richard Ellis North West, on business rates: “The key word is ‘temporary’, since the relief will only last for a
single year. I would have preferred to have seen the money being used to fund a permanent removal of downward transitional relief, which would have removed the inequitable charges borne by business in locations where rateable values have been falling.” MARTIN HOWARD, partner at property specialist Knight Frank’s rating team: “The
property industry welcomes confirmation that the empty property rate exemption threshold will be raised from £15,000 to £18,000 for the next financial year. “However, it is disappointing the Chancellor decided not to enact the 50% relief for all vacant properties which was possible under the current Empty Property Act.
“Some businesses will continue to demolish existing unoccupied premises to escape the widely condemned financial burden of this tax.” MARTIN WRIGHT, chief executive of the North West Aerospace Alliance, said: “The Budget includes measures to ensure banks support small businesses. “This is welcome but
overdue, since small companies have had to bear significant hardship. “The emphasis on science, technology and maths in universities is also a good sign of the intent to focus more on technology in the economy. “On the whole, it was a bits-and-pieces Budget that is not going to give much to an export-led recovery.”
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Thursday, March 25, 2010
LDP budget 2010 FSB attacks Chancellor for not scrapping NI hike THE Federation of Small Businesses (FSB) welcomed help for small businesses, but is disappointed that the Chancellor is proceeding with the proposed hike in National Insurance Contributions (NICs). John Allan, Merseyside, West Cheshire & Wigan regional chairman of the FSB, said: “This Budget has provided welcome news on helping to improve small businesses’ cashflow, but the increase in the NICs will be bad for job creation. “Small firms are key to furthering economic recovery as the UK’s largest employer, and we are concerned that through continuing plans to increase employee NICs and not introducing a NICs holiday to firms employing less than 50 staff who take on more employees, it will increase pressure on struggling firms meaning they will not be able to take on additional staff.
“FSB and CEBR research shows that the 1% increase would cost 57,000 jobs in the UK. It is a tax on jobs which will do nothing to aid economic growth. “Proposals to increase the Small Business Rate Relief threshold will be welcome news for those small firms in England whose cash-flow is hindered by big tax bills. “A third of FSB members have said that business rates are the biggest taxation obstacle to growth and the announcement will go far to help firms. “The FSB welcomes the Government’s commitment to get the banks lending to small businesses, but feels the targets will have little impact if the banks do not begin to offer more affordable finance. The Government must now put pressure on the banks to lend affordable finance to small businesses.”
Favourable wind helps Darling’s tightrope walk Small firms the key – John Allan, of the FSB
Support for video games industry is ‘inspired’
Government has made right decision – Dr Richard Wilson
VIDEO games trade association TIGA has warmly welcomed the Budget announcement that the Government planned to introduce tax relief for the sector. Video gaming is a major industry in Merseyside and Cheshire, with leading firms from Sony Computer Worldwide Studios Europe to Bizarre Creations employing hundreds. TIGA has been calling for the Government to give developers tax breaks to ensure talent remains in this country, rather than going to countries such as Canada where such support is offered. TIGA chief executive Dr Richard Wilson said: “This is an inspired decision. In backing TIGA’s Games Tax Relief, the Government has chosen the future over the past, growth over decline, success over failure. “Games Tax Relief will increase employment, investment and innov-
ation in the UK video games sector. Our research shows that Games Tax Relief over a five-year period should create or protect 3,550 graduate level jobs, increase or safeguard £457m in development expenditure and encourage developers to adopt new business models and create new Intellectual Property. “Games Tax Relief will ensure that the UK remains a world leading developer of video games. Games Tax Relief is good for the UK video games industry, good for UK consumers and good for the UK economy. “For this to be announced in the Budget is the decisive breakthrough that TIGA has campaigned for. Ministers have made the right decision at the right time for the right industry. “TIGA now looks to the Opposition parties to give their full support to Games Tax Relief in the Finance Bill.”
‘A mutton dressed as lamb Budget’, says PSP THE Formby-based leader of Private Sector Partners (PSP), Len Collinson, accused the Chancellor of electioneering. PSP represents 25 professional institutions and trade associations in the North West. Mr Collinson said: “This was a mutton dressed as lamb budget designed for the election. “There were some superficially attractive measures such as the business rates suspension, the doubling of entrepreneurs’ CGT relief, and the extra money for science places at university. “However, these are extremely modest and must not flatter to deceive. Britain is standing on an economic knife edge with public debt at its highest-ever level. “In this context, the Budget was a profound failure. It did not tackle
Budget ‘a profound failure’ – Len Collinson, leader of PSP public sector overspending or substantially reduce public borrowing. “So we remain in perilous waters. If world interest rates go up, we may not be able to pay the interest on our
Bill Gleeson
debt. It is that serious, so business will remain extremely concerned about the future of the economy. “Big, bold and unpopular decisions will need to be made.”
HAVE you ever watched a tightrope walker? One wobble either way and he comes tumbling down. I got the same impression listening to Chancellor of the Exchequer Alistair Darling yesterday. His Budget speech needed to tread the fine line between the need, on the one hand, not to cause Britain’s international credit rating to go into a tailspin while, at the same time, not doing anything to antagonise his party’s core voters ahead of the forthcoming general election. Those core Labour voters include millions of public sector workers whose peace of mind Mr Darling didn’t want to disturb; not yet, anyway. In the end, he succeeded in walking a pretty straight line. The Chancellor did nothing that looked at all daring or likely to cause him to lose more votes than his party has already lost. Mr Darling got lucky. The economic winds have been a tiny bit more favourable than anticipated. Unemployment, in particular, is lower than predicted. As a result, tax receipts have held up well, despite the recession, meaning this year’s public deficit will be £11bn less than forecast. Had tax revenues been weaker than anticipated, he would have had some explaining to do. The most dramatic thing he did was cut stamp duty for first-time buyers of homes worth up to £250,000. Whether this measure is sufficient to stimulate the housing market is open to doubt. First-time buyers will save up to £2,500, but these people will still struggle to persuade banks and building societies to lend them the mortgages they need, unless they have saved up tens of thousands of pounds for a deposit. An unintended consequence of the stamp duty cut may be to force sellers of houses cur-
rently valued just above the £250,000 threshold to reduce their asking price. Mr Darling took the opportunity to sound dogmatic about taxing the well-off. The increase in stamp duty on the purchase of homes worth more than £1m is unlikely to lose him any votes, but it is very likely to create the impression that Labour is rediscovering its basic instinct to hurt the nation’s wealth creators. There were plenty of cheery sounding measures introduced for business. The nationalised banks have agreed to lend billions of pounds to small companies. A new £500m investment fund is being created to help small firms grow. It all sounds great, but as ever, with anything any Chancellor says these days, it wouldn’t be a great surprise should it turn out that very little of that money actually made its way to businesses. This Chancellor deferred the tough decisions. The public sector gets to keep its current employment levels for the time being. The quid pro quo for that is public sector pay rises will be kept under tight control over the next few years. That seems to be a good deal for public sector workers, who will understand on which side their bread has been buttered. Many in Liverpool may see an even stronger reason to see that Labour is best for them. The promise that many thousands of Civil Service jobs will be relocated from London to the regions is very likely to benefit this city. Pall Mall and environs could be transformed into a Whitehall in the North. Liverpool has the infrastructure to handle a big influx of jobs. The downside is that Liverpool’s economy is already over-dependent on the public sector as it is. It’s a factor that acts as dampener on the pace of economic growth in the region.
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Thursday, March 25, 2010
LDP budget 2010
Stamp duty change a huge help for housing market by Tony McDonough
DEPUTY BUSINESS EDITOR tony.mcdonough@liverpool.com
ESTATE agents in Merseyside last night welcomed the news that stamp duty will be scrapped for first-time buyers purchasing properties costing up to £250,000. The move, which will apply during this year and next year, will mean nine out of 10 people buying their first home will not be liable for the tax. The change will offer some relief to hard-pressed first-time buyers, who currently have to save up deposits averaging 25% of their home’s value. It will be funded through the introduction of a new stamp duty band of 5% on properties costing more than £1m from April next year. Around 92% of first-time buyers would have been exempt from stamp duty during 2009 if the threshold had been £250,000, according to the Council of Mortgage Lenders. People buying their first home in London and the South East will be the biggest winners as a result of the increase, with 74% of first-time buyers in the capital and 72% in the South East buying homes priced between £125,000 and £250,000 during 2009, followed by 61% of people in the South West. But, at the other end of the scale, only 15% of buyers in the North are likely to benefit from the move, rising to 20% in both Wales and Yorkshire and Humberside. James Kersh, a director of one of Merseyside’s biggest estate agencies, Sutton Kersh, said the measures could stimulate recovery in the local housing market. He added: “A vast improvement in the availability of mortgages remains key to the recovery of the housing market. The Budget announcement of stamp duty being doubled to £250,000 should help to stimulate the first-time buyer and lower end of the market. “Increased activity in these markets should then filter in to the broader market. Properties valued at £250,000 or less account for a large proportion of the local market. “If Lloyds Bank and Royal Bank of Scotland increase their lending as requested by the Government, then this – teamed with the new stamp duty rules – should aid further recovery in the housing market.” Daniel Stear, of Kirwans Solicitors, also welcomed the announcement from the Chancellor. He said: “The announcement by the Chancellor that stamp duty will be removed on properties up to £250,000 for first-time buyers is extremely welcome news, which will hopefully go some way to kick-start the property market. “Although there is activity in the housing market, first-time buyers are the key and at present they are facing an uphill struggle to raise enough money for deposits. What the market needs right now is a boost in confidence and the changes should go a long way to providing that. “Scrapping stamp duty up to
Chris Johnson, of Smith and Sons – points out that bank finance is still very difficult to obtain Picture: JAMES MALONEY
James Kersh, of Sutton Kersh – said the move could help recovery £250,000 will provide a much needed relief for cash-strapped first-time buyers, and the measure will help to inject life back into a still fragile housing market.” Louis Anastasiou, managing director of estate agents Andrew Louis, described the doubling of the allowance
as “fantastic”, but said more could be done to help the market. He added: “The Government needs to do more to make finance more available to first and second-time buyers. “Enquiries are coming through and have trebled on last year, credit rat-
ings are strong but wannabe buyers are finding it hard to get finance.” However, not everyone in the Merseyside property sector was so easily impressed. Chris Johnson, managing partner of Wirral-based agency Smith and Sons, said the stamp duty change was a “headline grabber” but was sceptical whether or not it would produce real benefits for the market. He added: “While the threshold for stamp duty has doubled from £125,000 to £250,000, for the following two years and as this Government remains in power, this is only applicable for first-time buyers, therefore anyone who has previously owned a property will not be eligible for this relief. “In addition, as bank finance remains difficult to obtain, I believe that this proposal, while welcome, may not have any particularly wide-ranging effects.” And Alan Binks, of Homelets, also said: “Undoubtedly, this is a good move, but realistically what first-time buyer can afford a £25,000 deposit on a £250,000 house? “And that’s the absolute minimum. Having said that, the stall in the buyers’ market has had a great impact on the rental market and this should help that further, as many tenants are frustrated buyers saving up for their deposit. I can’t see that changing this year. “Hopefully they’ll make it easier for people to sell their homes so we can get more stock and satisfy demand.”
Darlings help to keep up tradition ALISTAIR DARLING’S appearance on the steps of 11 Downing Street to pose for photographs with his wife, Margaret, before delivering his Budget, continues a long-held tradition. The image of the pair provides a visual marker in history of the Chancellor’s most significant task. With Mrs Darling resting her head on her husband’s shoulder, the pictures will join archives tracking the changing faces, hairstyles and fashions of politicians and their spouses.
The Chancellor with his wife, Margaret Wearing a beige skirt and jacket with black tights and a black bag, the current Chancellor’s wife’s clothes were in keeping with the smart attire chosen by her predecessors. But beyond the formal nature of the outfits, there have been a number of differences in style. In 1929, then-Chancellor Winston Churchill and his wife, Clementine, attracted a crowd of onlookers with her striking fur coat and hat and his top hat and bow tie. By the 1970s, the men of the hour no longer dressed so formally, and had adopted the suit and tie option still worn today. But there were signs the women were retaining an air of formality. Roy Jenkins’s wife, Jennifer, donned black gloves with a skirt suit buttoned to the neck for the 1970 Budget. In 1978, Denis Healey’s wife, Edna, kept her hair in the same set, curled style but opted for a floral patterned blouse and jacket with a necklace.