The long awaited UK Budget for 2012 was released yesterday, with many headline grabbing announcements tactically leaked to the press prior to the occasion. The Chancellor announcing the budget is almost comical at moments due to the pantomime behaviour of the political parties in the House of Commons. At times they argued like school boys, both jeering each other with sound bites to fill the newspaper opinion columns. However beneath all of the political rhetoric, the Budget is a key factor of government intervention to guide the UK and has important consequences.
The majority of the UK press has hit out at George Osborne insisting that he is taking from the poor, disadvantaged and the elderly to enable relief for the wealthy. It will take time for some of these alterations to take effect and hindsight to see if he was correct is a wonderful thing.
Headline grabbing points of the Budget 2012:
- From 2013 the top rate of income tax of 50p is dropped to 45p, offering an incentive to the UK’s top earners to domicile in the UK and to contribute to the government purse
- A staggered drop in Corporation Tax, opening the UK once again to Business
- The ‘Mansion Tax’ on houses over £2m, meant as an evener to the reduction in income tax
- 37p increase of duty on cigarettes
- Change’s in the age of the state pension to reflect the ageing economy and reduce public debt
- From April 2013, 300,000 will now be forced into the 40p tax band as the threshold reduced to £41,450 from the current £42,750
- ‘Granny Tax’ of freezing the elderly’s income subsidy that is subject to tax hits an estimated 4 million pensioners
Regardless of your political affiliation or how the Budget directly impacts on your purse, trying to organise this countries public finances after near financial Armageddon is a tall order. Years of over borrowing in the ‘good times’ have left UK PLC with little room to manoeuvre in the bad. Fiscal responsibility is a difficult topic, which is often politicised for short term gain rather than longer term thought and planning. With the majority of the Budget known before release it is unsurprising that the markets failed to react during the announcements. Sterling and the FTSE 100 remained relatively flat for the remainder of the European session yesterday.
It does seem as if Osborne is attempting to balance much needed austerity with incentives for growth. The main focus is not how journalists commentate on the budget, but what the all important rating agencies think of the Chancellors plan. The UK needs to be open for business and to see growth, a cut in the countries credit rating could lead to higher borrowing costs perpetuating the current situation and hindering much needed future growth.
Favourite sound bite
Chancellor George Osborne in context of reducing the top rate of income tax:
No Chancellor can justify a tax rate that damages our economy and raises next to nothing
In other news…
Game Group has called the administrators in after stakeholders admitted that the crisis struck business had no equity value. It’s a blow for the high-street as another well known name hits the wall, which is likely to leave a stain on hundreds of high-streets as another empty unit.
Sainsbury’s has seen a boost in market share in the highly competitive supermarket industry. The boss Just King believes that the retailers success “..was not dependent on others failing.” The group has continued to win market share from its rivals as it tries to build customer mention and compete on price.
Lloyds Banking Group has raised £170M through a new share issue to restart dividend payments.
Other than the headline grabbing Budget, yesterday was also the release of the Bank of England MPC minutes from their March meeting. This did move sterling as it showed that 2 members (Adam Posen and David Miles) had voted for further quantitative easing (QE). They also discussed that they were worried by the high Crude Oil prices that could slow the global and domestic recovery.