Wednesday, April 22, 2009

Some Budget Thoughts....

So, having been busy for the afternoon with things in my personal life I have now heard the details of the Pawnbroker Budget. I'm not all surprised by the news that we're going to pop off down the pawnbrokers again and see what we can get for UK Plc. Frankly, does anyone think that a man who has spent the last decade borrowing to spend - I refuse to use the word "invest" - is going to suddenly become frugal? Anyhow, here's my own summary.

50p Tax Rate: I've always believed that if the Government ends up taking more than half of what you earn it is, in principle, wrong, however much that might be. When you factor in NI on this it's a piss take really.

It's pretty clear that move was one of those political ones designed to make the Tory Party either back it or scrap and create a dividing line, with the added bonus of putting Cameron into a possible "row with the grassroots" scenario.

My view is that it should not be a "first Budget" repeal priority, after all Thatcher didn't go hell for leather straight away, but there should be a strategy for wholesale income tax reform that moves the low end out completely and flattens it for the rest.

Car Scrappage Scheme: Absolute total bollock. This move will not help either the sale of new cars or the big car manufacturers for the simple reason that only complete idiots buy brand new cars these days. Anyone sane waits six months so the "new" car they buy is effectively "old" because of the plates and is thus a shedload cheaper.

The minute you buy a "new" car and drive it off the forecourt it loses at least £2000 in value. Six months down the line it loses even more once the plates change even if it's only got a 100 miles on the clock. I'm yet to see anywhere how a "new" car is actually defined. After all, what if you had a car that had 10 miles on the clock but was ten years old and had never been owned into the system by anyone other than a dealer?

My guess is that this will apply to only absolutely brand new cars on the current and latest plates, and as I say, very few people buy those, and if they do you can pretty much guarantee the one their trading in, assuming they even trade anything in, won't be some ten year old clapped out motor. Now, given that most dealers will give you a "guaranteed £1000" anyway, this policy seems like little more than headline grabber that will have bugger all impact.

Fuel Tax: This one is going to kill them, big time. I predict that in the pre-Budget Report the changes are frozen for political expedience. I just passed a forecourt where unleaded was 99.9p a litre and it has been rising steadily for the past month. There will be backlash from consumer and haulage yet again.

Stamp Duty Holiday: No one is selling and no one is buying at the moment because they're watching prices fall and they're waiting. At the same time they're worrying about their jobs. Utterly meaningless.

Closing Tax Loopholes: How bloody long have they been saying they're going to do this? Oh yes, that's right, ten years. Do you believe them now?

More tomorrow.


Guy H said...

On the "50%" rate... the marginal rate between £100,000 and £150,000 is now *60%* because of the clawback of allowances, so fattish cats are going to suffer much more than very fat ones - not least because they are also going to be more exposed to anti-avoidance drives, having fewer opitions and less fancy advice.

Mostly Ordinary said...

The car scap scheme annoys be because if they wanted to really raise car sales they should cut company car tax. I get a car allowance but have always taken the cash because a decent four door saloon as a company car sets you back over £200 per month tax. I suspect that most people take the money rather than the car because the tax makes them too expensive.

AJ said...

Car Scrappage scheme what a load of tripe, the only people who would be able to afford the additional £4k or so are those that are not scraping by on less than the minimum wage, same goes for the increase in ISA allowance, how is this going to benefit anyone on less than min wage?

Agree totally about moving lower earners out of income tax and having a flat rate.

Anonymous said...

Car Scrappage scheme extract from DBERR press release:
* Passenger car or small van up to 3.5 tonnes
* First registered in the UK or after the date the scrappage scheme is launched and declared new at first registration in the UK with no former keepers
* UK specification vehicle
* Registered to the same registered keeper as the registered keeper of the eligible vehicle to be scrapped

Jojo said...

Dizzy, I do hope you will be doing your usual thing of thinking a bit wider than most. Too much of the commentary today seems to be based on the idea that we are all white-collar men. We might just be temporarily unemployed, but "the low-paid" are another, rare, species. The high incomes greatly outnumber those with no real income at all in column inches and presumably in real life. Women make up obviously less than 2% of the world and can safely be ignored. Car dealers are much more important than children.

Fragmeister said...

My car will fit the ten year banger rule. Nowif anyone can tell me where I can get the other 15 grand to replace like for greener like, please let me know.

3, 5, 19, 23, 27, 46 did not work last weekend.

Anonymous said...

It's an EU directive.

Anoneumouse said...

we have woken up and we can smell the "alkyl nitrite”

sphincters R us

Ted Foan said...

On the car scrappage thing - I have recently part-exchanged a 12-year old Honda Civic for an 07 model. If I'd bought brand new, even with the £2k allowance, I'd have to have found (or borrowed) another £6k at least. As you say, what's the point?

Sam Duncan said...

Forget the rest: the 50% rate and the broken window - sorry, car scrappage - scheme are between them the final, unarguable proof positive that this country is governed by a crowd of economically illiterate mouth breathing morons with no more brain cells than the rest of us will have money when all this shakes out. How was anyone ever fooled by these chancers?

Anonymous said...

On closing tax loopholes:

All they will do will make the tax regulations and calculations increasingly complicated - particulalrly for self-employed contractors.

Come the revolution, Primarolo is going to be made to eat her own IR35 legislation.

Cyclefree said...

It's not a 50% top tax rate, Dizzy, it's 60% for everyone earning between £100K and £113K which means they'll be paying 61.5%on that tranche of income. Plus we now have taxpayers who have no personal allowance at all. Iniquitous on so many levels.

Roger Pearse said...

The helot of ancient Sparta had a tax rate of 50%.

Of course if you earn at basic rate, you are already paying 46%; 22% PAYE, 11% NI, and 13% "employers" NI, the hidden tax.

Don't ever be fooled by the spin on the last one. If I want to hire you to do a job for me, and I have £100, what amount of it reaches you? The answer is £54. Which of the two of us pays the tax is strictly smoke and mirrors; from that transaction, the government takes 46%.

In the USA, tax freedom day was sometime last week. For us, we will be working for Gordon until June.

Nice one to increase the cost of transport, isn't it? Just watch the price of food jump again, as all our food is transported!

TomJ said...

@Roger: Well, if Employer NI is factored in it's 41%, or on 09-10 rates 39% of your earnings above £6475 and below £43888pa, as if you are looking at a percentage of what the employer is paying you should be looking at
(20+11+13)/(100+13)*100=39% or thereabouts. Of course, as Henry points out, it's further complicated by the different levels and thresholds for NI. As far as I can work out, taking Employer's NICs into account and assuming an even income distribution across the year these are the levels of the percentages of an employer's outgoing going to HMRC on an employee's earnings between the figures given:

£0 - £4940: 0
£4940 - £5720: 11%
£5720 - £6475: 21.1%
£6475 - £43,875: 38.8%
£43,875 - £43,888: 56.6%
£43,888 - £100000: 47.7%
£100,000 - £112,950: 65.4%
£112,950 - £150,000: 47.7%
Over £150,000: 56.6%

Here are the figures with my working added, lest anyone is interested:
£0 - £4940 (=Lower earnings limit, £95*52): No tax
£4940 - £5720(=Secondary threshold, £110*52): 11%
£5720 - £6475(=Personal allowance): 21.1% (=(11+12.8)/(100+12.8)*100)
£6475 - £43,875 (end of lower rate of Income tax): 38.8% (=20+11+12.8)/(100+12.8)*100)
£43,875 - £43,888 (=Upper earnings limit, £844*52): 56.6% (=(40+11+12.8)/(100+12.8)*100)
£43,888 - £100000 (begining of withdrawal of personal allowance): 47.7% (=(40+1+12.8)/(100+12.8)*100)
£100,000 - £112,950 (all personal allowance withdrawn): 65.4 %(=(40+20+1+12.8)/(100+12.8)*100)
£112,950 - £150,000: 47.7% (=(40+1+12.8)/(100+12.8)*100)
Over £150,000: 56.6% (=(50+1+12.8)/(100+12.8)*100)

Not including Employer's NICs, an individual will be paying:

£0 - £4940: 0
£4940 - £6475: 11%
£6475 - £43,875: 31%
£43,875 - £43,888: 51%
£43,888 - £100000: 41%
£100,000 - £112,950: 61%
£112,950 - £150,000: 41%
Over £150,000: 51%

This is further distorted by Tax Credit withdrawal at the lower end of the spectrum...

Anonymous said...

Guy H is right.

As is Dizzy

Thatsnews said...

There's even something in it that might hurt the Caribbean!

Even the Caribbeans Isles will suffer under this budget!Loopy, or what?