Wednesday, 22 April 2009

Budget 2009

So, Alistair Darling has just delivered his second budget and the highlights are as follows:

Government debt to be £175bn this year, £173bn in 2010, £140bn in 2011, £118bn in 2012 and a mere £97bn in 2013. As a measure of AD's forecasting skills note that he forecast this year's debt as £118bn only four months ago in his November 2008 pre-budget report.

His "growth" forecasts for GDP are -3.5% this year with the recession bottoming out by the autumn, then +1.25% for 2010 and +3.5% for 2011. Again, not really believable.

On inflation he reckons CPI will be 1.0% by the end of this year and RPI will be -3.0% by September, rising to zero next year.

Income tax on those earning over £150,000pa will rise to 50%. This breaks a manifesto commitment.

Booze and tobacco duty will rise 2% from tomorrow. Fuel will rise 2p from September.

On the plus side he has extended the stamp duty "holiday" on houses costing less than £175,000 until the end of the year. He also plans to get stalled housing development projects moving by throwing some money at them. He seems to have missed the obvious point that building even more houses won't help the housing market recover (there are currently 1,000,000 empty homes in the UK, btw.)

There were some tax breaks for business.

Also the amount you can put in a cash ISA will rise from the current £3,600 pa to £5,100 - from October for the over-50s, and next year for everyone else. It's not obvious why he has chosen to penalise younger savers in this rather petty manner.

Old people are also getting an improved winter fuel allowance: £260 for the over-60s and £400 for the over-80s. The savings allowance for pension credits rises to £10,000 - ie, you can have that much and still get pension credits.

There will be a £2,000 "scrapage" allowance for cars over 10 years old.

There was lots of guff about better regulation of the finance industry, including for the first time, Hedge Funds.

As a budget I'd sum it up as a nothing-budget by someone who has got nothing left to give, has spent every penny and maxed out the national credit card and now is just throwing tiny scraps to his pet causes while waiting for the inevitable axe to descend.

David Cameron gave a good response speech and referred to New Labour as the "government of the living dead," which seems about right.

Red book here.

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