Britain's Election Budget 2015

What to expect from Britain's Budget 2015 

The Budget before a General Election in May 2015 , as some cynically suggest is a "method of testing out policies ahead to gain feedback on the popularity of a policy, perhaps, the government, in an attempt to deliver future policies that gain greater voter satisfaction."

"We know this Budget is not only in an election year,but also with the backdrop of an improving economy with the UK achieving the highest growth rate in the G7 of 2.6%, low inflation of 0.3%,decent tax receipts and the Bank rate reaching its 6th birthday at 0.5% and likely to continue at that rate for another year".

It will not be a miracle to expect another popular announcement,along with the freeze on petrol duty, of putting money into the pockets of voters. It has been suggested that there will be an income tax pre-election give away benefiting some 27 million voters, with personal allowance to increase by £1000  to £11,000 per year from 6 April 2014, a cost to the Treasury of nearly £2.7 billion. 

It may also be expected that the Chancellor will announce, what Prime Minister,David Cameron promised in October 2014 suggesting "to take 1 million more of the lowest paid workers out of income tax," by increasing the personal allowance to £12,500 over the term of the next parliament. 

A Conservative Pledge  

Whenever the Conservatives have been in power, the rich are in for a field day. Even with a Coalition Government with a Conservative Chancellor, higher rate tax payers will expect to benefit. The long term target of £50,000 to trigger a 40% rate of income tax for higher rate tax payers which was also announced in October 2014, may feature in the Budget, or perhaps in the Conservative Manifesto. 

What tempered the Coalition was the diversionary target of "going after the conglomerates" of tackling tax avoidance,the loophole that allows companies to divert profits to lower tax regimes  in other countries through "management fees" or "transfer pricing".

It was during the recent heated Commons exchanges with the Shadow Chancellor,Ed Balls, who accused the Chancellor of negligence and sweeping issues about HSBC Suisse under the carpet,George Osborne indicated that the Budget was likely to include new measures.

He said: "Anyone involved in tax evasion, whatever your role, this government is coming after you.Unlike the last Government,who simply turned a blind eye,this Government is taking action now and will do so again at the Budget."

New financial and civil penalties for conglomerates,bankers and accountants who aid and abet tax evasion and aggressive tax avoidance are expected to be included in the Budget,in the wake of the HSBC tax avoidance scandal. 

Election Sweetners?

There could also be beside the Budget,an attempt to create a new criminal offence of "Corporate failure to prevent an economic crime" - an offence which would have more force than financial penalties.

The electorate has up to now witnessed the standard corporation tax rate of 20%,but if companies are judged to have moved cash overseas to avoid UK Corporation Tax, the diverted profit will be taxed at 25%.

Added to looking after vested interests, the rich and the affluent,or the Working Class, budgets in the past have hardly had the clout to target multinationals and banks, who have recently come under scrutiny.

Problem of Financial Penalties

We  have seen in the recent past, a plethora of cases of banks being regulated with heavy financial fines, The problem with financial penalties is that banks can easily afford to pay them. It appears, that banks seem to be happy pay hefty financial penalties and then just carry on misbehaving.

Problem of Multinationals  and Tax avoidance

Unless and until there is international agreement on Tax avoidance," in all likelihood, large multinationals will still attempt to move profits into lower tax regimes,but it will just be in a more sophisticated and/or complicated manner,so the likely effectiveness of this policy has yet to be proved."

But it is highly likely that at the Budget,the Chancellor is expected " to force multinationals to declare their revenue and profit figures on a country by country basis to put pressure on these companies and make it slightly more difficult to hide diverted profits."  

Cuts in Spending

According to researchers,on the basis of a future Conservative Manifesto aiming "to generate an overall budget surplus of £23.1 billion by 2019/20, and taking into consideration the legislation for tax increases and cuts to welfare spending already announced and  in place, a further £30 billion in cuts would need to be found." This is difficult,if not elusive as the savings from welfare cuts so far,according to economists, have not been forthcoming. It is anybody's guess, how the Chancellor is going to balance the Budget in an election year, retain the confidence of his backbenchers,the confidence of business, as well as the electorate.

It is my opinion that this time round, it is the most difficult budget to predict.With a juggling act
the Chancellor will go to prompt businesses to invest now to gain a higher tax benefit, thereby creating more jobs sooner rather than later.

Victor Cherubim