May
19 Business awaits first coalition budget
The newly formed independent Office for Budget Responsibility will in future publish economic and fiscal forecasts in advance of the budget, rather than the government. These won’t be binding upon the Chancellor of the day but will be difficult to ignore politically.
The “emergency budget” of the new coalition government will take place on Tuesday 22nd June. In advance of this the government is expected to reveal how it will save £6bn this year in spending cuts.
Critics argue that cuts should be delayed due to the fragile nature of the economic recovery so far. However the Government looks set to press ahead straight away to reduce the colossal deficit of around £166bn.
Many economists are predicting a rise in VAT from the current 17.5%. This could rise as high as 20%, although the increase may be delayed for retailers to cope with the complicated changes needed to their infrastructure. A 20% rate of VAT could raise as much as £11.5bn a year for the Treasury.
There is also expected to be news on Capital Gains Tax (CGT) with some form of rise in the offing. Full details are not yet known although the rate for business assets is likely to stay lower than for personal assets, protecting perceived entrepreneurship.