The Great Debate UK

Pre-budget report delicate balancing act for Darling


thomas-story – Thomas Story is tax director at BDO. He will participate in a Reuters pre-budget live blog on Dec. 9, at 12 p.m. British time. The opinions expressed are his own. -

Alistair Darling is facing the most difficult set of economic circumstances for any chancellor since the 1940s, with the projected substantial fiscal deficits for 2009 – 2010 and 2010 – 2011 likely to be revised upwards from 175 billion pounds to well in excess of 200 billion pounds. He must perform a delicate balancing act to secure the confidence of the global financial markets while protecting any fragile economic recovery and boosting public confidence.

The Chancellor is likely to increase the yield from income tax, national insurance, VAT and customs duties, which are the biggest revenue generators for the Government.

I think we’ll see the restriction or removal of corporation tax reliefs but, if the chancellor takes this course of action, he should recognise the continued impact of the credit crunch by exempting losses accumulated up to March 2010.