Wishes and predictions for Osborne’s budget
■ EY suggests there is little room for the chancellor to make big changes, given the spending constraints he has set for the Treasury, and that the OBR’s adjustments will be small.
■ However, the big four accounting firm expects George Osborne to make a move on the top rate of stamp duty, raising the top rate from seven to eight per cent, in a controversial step.
With the average home now in the three per cent band, EY suggest that a modest reform would be to index thresholds to inflation, so that they rise over time.
■ Deutsche Bank suggests that with rosier forecasts from the Office for Budget Responsibility (OBR) expected, the chancellor may feel more comfortable attempting to push fiscal consolidation further into the future, avoiding the difficult decisions in the year before a general election.
■ The bank also suggests that a planned corporation tax cut could be brought forward to this year.
■ Investment and exports are likely to be themes of the budget, and action could come from fiddling with capital spending allowances or reducing the rate of capital gains tax.
■ According to a poll of more than 1,000 of the business members of the Institute of Directors (IoD), firms want the budget to prioritise expanding the basic rate tax band, meaning that workers would not pay the 40 per cent higher rate of tax until they earn £50,000. Currently, income over £41,450 is taxed at the 40 per cent rate.
■ The IoD also says that the most popular option for reform of business rates would be to double the cap for the relief given to small businesses, from £6,000 for a single premises to £12,000.
■ IHS Global Insight also concludes that a “steady as she goes” budget is most likely, given the constraints of the deficit.
■ As such, they expect that George Osborne will reject calls for the threshold of the 40 per cent rate of tax to be raised, and that the credit ratings agencies that removed the UK’s AAA ratings are unlikely to return them soon.
■ The group also suggests that Osborne may announce new measures aimed at stimulating housebuilding, to add to the extension of Help to Buy’s first half, which he promised yesterday.
■ Reform says that since deficits rise by more in recessions than surpluses do in booms, each household in the country bears an extra debt of £4,700, a total of £124bn for the UK, in comparison to an outlook in which the two were balanced.
■ Because of the effect of what they call the “debt ratchet”, the think tank is calling on Osborne to establish an independent fiscal body with the power to raise and lower taxes, noting that 21 of the last 25 official government forecasts have projected that the budget would return to surplus, which has never transpired.
■ KPMG also polled hundreds of medium-sized businesses, showing a similar story to the IoD: a fifth of firms want a less expansive threshold for the 40 per cent rate of income tax.
■ Even more firms surveyed by KPMG back a reduction in national insurance contributions, coming out as the most popular potential policy in the budget. A further 18 per cent wanted a reduction in business rates. Three per cent named further Help to Buy style schemes as the single measure they would like to see to make a difference to their firm.