UK News

What did you think of the 2011 budget?

George Osborne has delivered his budget speech for the 2011/12 fiscal year to parliament.

The Chancellor said corporation tax would be cut by two percentage points to 26 percent from April, rather than by just the one point originally planned. A levy on banks would be increased to help pay for it.

Osborne also announced a surprise cut in fuel duty, while slapping higher charges on oil and gas production which he said would raise 2 billion pounds. Meanwhile, the government will offer loans to help first-time buyers get on the property ladder.

Osborne called it a “Budget for growth and jobs.” Do you agree? Take part in our poll below or leave a comment on this page.

What did you think of the 2011 budget?

• Great budget!
• More good than bad
• Neither good nor bad
• More bad than good
• Awful budget!

Is there a Plan B for the government?

Our Reuters/Ipsos MORI poll is likely to make cheery reading for Britain’s Labour party.

For the first time since January 2008, they are level pegging with the Conservatives in terms of popular support; for the first time since May’s general election, more people are dissatisfied with the government than are pleased with it, and – perhaps most heartening of all for the opposition – three-quarters of the public would rather see slower public spending cuts than swift ones. And all that without Labour even having a leader.

Of course, it’s early days for the coalition – and no one would expect a government that’s spent almost every day since it was formed talking about cuts, austerity and tough times to be wildly popular. Conservative Prime Minister David Cameron and his Liberal Democrat deputy Nick Clegg can certainly take solace, for example, from the data showing their personal approval ratings remain high. (Although interestingly – and highly unusually – Clegg remains more popular with Conservative voters than with his own party).

Professor Philip Cowley, a political scientist who is writing the definitive guide to the general election and who will be speaking at our debate on the spending review on Friday, argues government is unlikely to be too troubled by the findings. “Rather than leading to the downfall of the coalition, polls like this make its survival more likely, because they give neither partner any incentive to split away,” he told me, pointing out several historical examples – including after the May 1979 election – when Labour pulled ahead of the Conservatives following a national vote.

“No Conservative strategist will need reminding that the 1979 contest ushered in the longest period of one party-rule since Britain became a democracy,” Cowley noted.

True. But the findings of the political monitor show the government has not yet secured the buy-in for its economic policies it needs to retain popular support if things go awry in the economy. Voters are currently giving the government the benefit of the doubt. They would like to see the pace of spending cuts to be slow rather than swift, yet at the same time they believe the current government’s policies will improve the state of Britain’s economy.

from The Great Debate UK:

VAT rise – is it really that bad?

Rachel Mason is public relations manager at Fair Investment Company. The opinions expressed are her own.-

So the new coalition government is putting VAT up from 17.5 percent to 20 percent on January 4 2011 and the country is up in arms, but is it really that bad?

Okay, in an ideal world, taxes would be low and public services would be top quality, but sadly, the world we live in is not like that. The Institute of Economic Affairs (IEA) says Britain’s real debt is already 4.8 trillion percent – six times higher than the official figure of 772 billion pounds – and the simple fact is we need to pay it back, and to do that, the government needs to raise tax and cut spending.

A rise on income tax would have been a very unpopular move, so the government really only has one option left – VAT.

As George Osborne said, "This single tax measure will by the end of this Parliament generate over £13bn a year of extra revenues. That is 13 billion pounds we don’t have to find from extra spending cuts or income tax rises."

Considering what VAT actually is, the reaction to the rise has been disproportionate. For a start – did anyone really notice a big difference when Labour cut VAT to 15 pounds? No? Well, we probably won't notice a difference when it goes up by the same amount.

from The Great Debate UK:

Entrepreneurs needed if the UK is going to make up the deficit

-Joe White is managing director of Moonfruit.com. The opinions expressed are his own. Join Reuters for a live discussion with guests as UK Chancellor George Osborne makes an emergency budget statement at 12:30 p.m. British time on Tuesday, June 22, 2010.-

The first Tory budget is a critical one. The Treasury and Chancellor George Osborne have been dropping hints for weeks about a big slash in public sector spending in an effort to try and prepare Whitehall for the worst, and to rally the private sector to step in and fill the deficit.

It’s a risky strategy. The belief that you can slash deficits and generate private sector growth is close to Tory hearts, and further encouraged by recent successes in this area by the Canadians.

But the difficulty is that when Canada implemented rapid deficit reduction, the wider global macro-economic climate was much more benign. One person’s spending is another person’s income, so reducing spending will reduce income unless other kinds of spending rise to fill the gap.

Economically there are only four kinds of spending, the total of which equals the national income: Consumer (you and I spending), Government (we all know about that one), Investment (generally spending by companies) and the net of Imports and Exports (net imports sends cash overseas, net exports increases domestic income).

Government spending is going to fall, that much is clear. Unless something else rises, national income will fall by definition.

from The Great Debate UK:

Taxes and the emergency budget

-Julia Whittle is head of International at Punter Southall Financial Management. The opinions expressed are her own. Join Reuters for a live discussion with guests as UK Chancellor George Osborne makes  an emergency budget statement at 12:30 p.m. British time on Tuesday, June 22, 2010.-

It is highly unlikely previous Capital Gains Tax proposals will be reversed in Chancellor George Osborne's first budget.

The new rate is due to increase in line with income tax – and the option of taking it up to the highest rate of 50 percent has not been ruled out. The change could start from June 22, or even be backdated to April 6, 2010

This will hit second properties as well as investment portfolios. The tightening up of the definitions around  “private residence relief”  which enables people to sell their main residence free if tax could pour salt on the wound for second-property owners.

Regarding pensions tax relief, we believe Chancellor George Osborne is likely to stick with the principles of the current proposals, but could ease some of the administrative complexities.

There’s also a chance that he could decide to replace the current proposals with a lower annual allowance which the pensions industry has been lobbying for as a simpler alternative.

from The Great Debate UK:

A budget of woes? Where has our imagination gone?

-Ruth Porter is communications manager at the Institute of Economic Affairs. The opinions expressed are her own. Join Reuters for a live discussion with guests as Chancellor George Osborne makes  an emergency budget statement at 12:30 p.m. British time on Tuesday, June 22, 2010.-

George Osborne has the chance to do something really radical on Tuesday in his budget statement.

He must cut public spending to shore up Britain’s precarious economic situation - he has no choice.

But the fiscal crisis also means he can do far more than this.

Indeed, the Chancellor has perhaps the best opportunity in a generation to make the sweeping changes necessary for the UK to reduce the size of the state and restore economic growth.

Imagine using the budget to restructure how we tax: flattening income taxes, reducing corporation tax, getting rid of bizarre exemptions to VAT, abolishing inheritance tax along with Capital Gains Tax and simplifying enormously the tax rules for individuals and businesses.

This may hurt a little

Britons are being prepared for the hardest of hard times. Prime Minister David Cameron has warned the public that they will feel the impact of deficit-cutting decisions for years and maybe even decades. Cameron justifies the pain by saying that doing nothing about debt would be disastrous and that Britain will come out of the other side as a stronger country.

His finance minister George Osborne and LibDem sidekick Danny Alexander were setting out plans on Tuesday for how to conduct this year’s spending review, with  unions, the public and the private sector asked to contribute ideas.

Former Canadian finance minister Paul Martin told Reuters that the key to his country’s 1990s deficit cuts was being honest with people about what was to go.

The problem Cameron and his coalition may face is that spending cuts seem justified — as long as it’s someone else’s benefits or perks that are being pruned.

Where would you swing the axe to help cut the budget deficit?

George Osborne takes risk with rhetoric

George Osborne once said he spends more time thinking about politics than he does about economics.

Now that he’s Chancellor of the Exchequer, he probably needs to think about the latter a bit more.

Markets are likely to forgive him his first news conference at the Treasury today. But they may not always be so kind.

His warnings that Britain could end up like Greece were skirting the line when in opposition but could really put the frighteners on investors who are already very nervous about sovereign debt.

Ditto the comments on black holes. Politicians love black holes but the last thing the guardian of the nation’s public finances need to be telling potential buyers of UK government bonds is that the situation is even worse than they thought.

Markets are not stupid, Osborne said this morning. But while they may identify his comments as political rhetoric for now, they could just as easily take him at his word. And that could spell real trouble for the pound and gilts.

New politics? Looks like more of the same to me

When I interviewed David Cameron earlier this year after an event at Thomson Reuters in which he, George Osborne and Ken Clarke delivered their views on the economy under a “Vote For Change” banner, I suggested that watching three white, middle-aged men talking about what was good for Britain didn’t feel much like change to me. Cameron jokingly replied that Clarke, 69, would be flattered to be described as middle-aged.

The Conservative leader then shifted in his seat, sat up straight and talked seriously about all the hard work his party was doing to field more female and ethnic minority candidates. His new Deputy Prime Minister, Liberal Democrat leader Nick Clegg, talks repeatedly of a “new politics” and how this time politicians will do things differently.

True, we have a coalition for the first time since the Second World War — but, after that, the handful of ministers who will be running government don’t represent much of a change. Of the 16 senior cabinet positions Cameron announced on Wednesday, there are just two women — one of whom is also the only one non-white cabinet member.

And, true, one of the top cabinet jobs — Home Secretary (interior minister) — has gone to a woman but, as someone joked to me yesterday, the fact that’s she’s also minister for women and equality looks like a typing mistake. Her real title, they suggested, should actually have been ‘Home Secretary, and token minister of women and equality.’ Theresa May, the new Home Secretary, will struggle to shake off suggestions that she got the job not on merit but rather because Cameron and Clegg didn’t have a lot of senior female politicians to choose from.

In the parliamentary parties, I count 42 Conservative women MPs (14 percent of the total). The Lib Dems fare even worse: I count just six female MPs, little over 10 percent.

Tackling our debt mountain has got to be the new government’s first and top priority, but unless something urgent is done to improve diversity in senior political jobs — as is slowly being done in business — then all the talk of new politics will end up being nothing but wrapping for old government.

Tories could be making sterling a rod for their own back

Talking down the pound could have some pretty bad consequences.

Ever since the debacle of sterling being forced out of the European exchange rate in September 1992, British officials and politicians have maintained a stiff upper lip when talking about the pound.

The Conservative government spent billions of pounds and jacked up interest rates to defend the currency back then, but to no avail. The party’s reputation for economic competence was lost, paving the way for Labour’s big win in 1997.

The one lesson that everyone obeyed was there was no point trying to manipulate the currency because you could not buck the market.

I can only remember one occasion when Gordon Brown, chancellor of the exchequer for a decade before he became prime minister, made the kind of currency comment that news agencies and euro zone politicians love.

No one can be happy with an 18 percent rise in the pound, he said in 1997 soon after taking office. Since then, the British usually don’t even like repeating the standard G7 language on currencies, so scared are they of mayhem in markets.

Could the Conservatives be about to change all that? They certainly appear to be playing with fire. Former chancellor and current Conservative business spokesman Ken Clarke warned on Tuesday that the country could soon be facing another sterling crisis.