One WAG said that economists only made predictions in order to make astrologers look good !
When you look at the difference between the OBRs (Office for Budget Responsibility) predictions in March and the same body’s predictions in November one might be forgiven for deciding that the best way of reading the economy is to look at the constellation of the stars.
Before bidding for Russell Grant’s job, I think there are some important pointers for the future, five years from the Autumn Statement.
First raising taxes has become more and more difficult. The old favourites of business rates, petrol taxes and freezing personal allowances have become politically impossible. There are now no easy targets apart from non-residents to pick on. All the easy low hanging fruit such as rounding up VAT to 20% have been exhausted and policies such as raising employers national insurance contributions would prove massively counterproductive. Indeed the NIC relief to all companies and the targeted relief for employing young people indicate a determination to reduce taxes on employment.
So if there is still fiscal tightening of at least £12 billion to be achieved, the question is how will this squeeze be effected ?
We know what the Conservatives are planning a further squeeze on public spending particularly on welfare coupled with a new offensive on tax evasion and avoidance. Politically the Conservatives believe that attacking welfare benefits coupled with tax avoidance tools for the rich send out a balanced message. Whether they achieve their goals would be open to some question but companies and individuals who indulge in “aggressive” tax planning must expect greater scrutiny from HMRC.
The Lib-Dems seem to have adopted a similar path with the exception of a desire to hit the wealthiest with a mansion tax and curbing reliefs on pension contributions.
No-one knows Labours policies apart from agreeing on the mansion tax. Under New Labour the party was very cautious about increasing tax rates until the end of its turn of office. There are indications that it is looking to raise taxes substantially ( notably corporation tax and higher rate income tax) but until they publish any policies this really does remain for the stars.
