Bel is thinking

As promised, a little more on the Budget. I know this topic has been covered in other places, but having spent yesterday conducting briefings on the Budget, I came up with an interesting exercise.

There is both good news and bad news for the taxpayer in the Budget. I thought it would be interesting to separate both, so that we can see when each takes effect. It seems to me that most of the good news takes effect later, while the bad news takes effect sooner. If this is the case, we will know exactly how Gordon Brown plans to fund the so-called tax cuts he has announced.

In setting out the measures, I have concentrated on those tax measures that are bound to affect directly how much tax we pay. However, I have not bothered with VAT and all the environmental taxes, etc. Life is too short, and besides, I expect there will be plenty of commentary on them elsewhere. I have also ignored changes aimed at correcting errors in the law, as well as press releases announcing consultation.

I will divide the post into measures taking effect before April 2008, and those taking effect after April 2008.

Measures taking effect BEFORE April 2008

• Increase in small companies corporation tax rate from 19 per cent to 20 per cent. Bad news.
• Withdrawal of balancing allowances on industrial and agricultural buildings, for contracts made after 21 March. Bad news.
• Withdrawal of balancing charges on industrial and agricultural buildings, for contracts made after 21 March. Good news.
• Tax relief for renovation of business premises in designated disadvantaged areas. Good news.
• Temporary extension of 50 per cent rate for first year allowances. Good news.
• Anti-avoidance measures to restrict capital loss and gain buying (takes effect 21 March). Bad news.
• Measures to restrict the buying of tax losses from loss-making corporate members of the Lloyd’s insurance market, who are ceasing underwriting activities. Bad news.
• Anti-avoidance measures to counteract attempts to circumvent the tax rules on the sale of lessor companies (takes effect 21 March). Bad news.
• Tightening the qualifying conditions (for tax relief) for venture capital trusts, enterprise investment schemes, and corporate venturing schemes (takes effect on 6 April 2007). Bad news.
• Relaxation of other qualifying conditions (for tax relief) for venture capital trusts, enterprise investment schemes, and corporate venturing schemes (takes effect on 6 April 2007). Good news.
• Stamp duty land tax relief for zero-carbon homes that satisfy very stringent conditions (1 October 2007). Good news, if you can jump through all the hoops to qualify.
• Targeted anti-avoidance rule for capital gains tax (takes effect from 6 December 2006). Bad news.
• Anti-avoidance measures targeting life insurance policies and commission arrangements (takes effect 21 March 2007). Bad news.
• Anti-avoidance measures targeting employee benefit trusts (takes effect 21 March 2007). Bad news.
• Relief from the 40 per cent trust rate for service charges and sinking funds in the public sector (takes effect on 6 April 2007). Good news.
• Small increase to the amount of benefit you can receive from a charity without your gift being disqualified from gift aid (takes effect 6 April 2007). Good news for charities.
• Tax charge for charities which hold large lotteries without a licence (takes effect 6 April 2007). Bad news.
• Anti-avoidance measures targeted at managed service companies. Bad news.
• Exemption for carbon trading business by investment managers trading on behalf of non-resident companies and individuals. Good news.
• Removal of tax charge from army officers’ Operational Allowance, and payments under the Armed Forces Redundancy Scheme 2006 (takes effect April 2006). Good news if you are an Army Officer.

Measures taking effect AFTER April 2008

• Reduction in income tax basic rate from 22 per cent to 20 per cent. Good news.
• Abolition of the 10 per cent tax rate. Bad news. 
• Reduction of mainstream corporation tax from 30 per cent to 28 per cent. Good news.
• Reduction from 25 per cent to 20 per cent in rate of writing-down allowances one can claim for expenditure on capital items. Bad news.
• Increase from 6 per cent to 10 per cent in rate of writing-down allowances one can claim for expenditure on long-life capital items. Good news.
• Writing down allowance of 10 per cent for fixtures integral to a building.
• Payable tax credits for capital losses on certain green technologies. Good news.
• Increase in research and development tax credit. Good news.
• Small increase in subscription limits for ISAs. Good news.
• Extension of non-repayable dividend tax credits to holders of shares in non-UK companies in prescribed circumstances. Good news.
• Removal of benefit in kind charge where an employee makes private use of a property abroad which has been bought through a company. Good news.
• Tax discount for company car drivers who drive a car capable of running on E85 fuel. Good news.

So judge for yourself. Seems to me that the extra tax revenue the Chancellor will get from the pre-April 2008 changes will more than pay for any tax cut. In particular, the anti-avoidance measures targeting businesses will yield a lot of tax revenue. One other point to make is that the Good News items in the pre-6 April 2008 list are of very narrow application. They apply to charities, soldiers, buyers of zero-carbon homes, and such small groups of people. So good news for them, but not for everybody else.

Television chatshows in the United Kingdom have one staple: a warring young couple with two or three children apiece and a shared baby. The typical story runs along these lines: young girl has two children from a previous relationship; she meets young boy who already has a child of his own. Young boy is sent to prison, invariably for burglary or joyriding. Young girl is pregnant. When young boy comes out of prison, he accuses young girl of cheating on him, and they end up on a television show with the theme: Lying ex! Is my baby really mine? Or even the more threatening ‘I want the truth TODAY!’

The understanding chatshow host gives both parties a chance to put their stories, and then runs through some standard questions, well knowing what the answers will be: did you plan this baby? Is there a history of alcohol abuse in the family? Is there a history of drug use in the family?

As the chatshow host does not really have any answers to the problems, or more likely, dare not express her real views on the matter, she falls back on a default statement, ‘the innocent party in all this is the child. You should think of the child’.

This statement can be guaranteed to bring applause from the studio audience. By the same token, any member of the studio audience who utters these magic words is generously applauded and acknowledged with the sort of respect normally reserved for a guru or psychic.

This would lead us to believe that the British are a nation of children lovers. Do not be fooled. That is far from the truth. This is a nation which has not yet worked out what children are for. To some, they are a tool with which to beat guilt-ridden working mothers into submission (Daily Mail). To some parents, children are little gods and goddesses at whose pampered altars they must pay homage every Christmas. To the Government, they are little beings to be bribed with precious taxpayers money (Child Trust Funds, anyone?) in the hope that the appreciative parents will do the right thing and vote wisely.

Perhaps it is the Government’s ambiguous relationship with the nation’s children that is currently causing the confusion. The Government that thinks nothing of jailing a mother because her teenage children refused to go to school is the same Government that doles out contraceptives to 14 year olds behind their parents’ backs. So who is responsible for the children? Legislation exists to penalise parents who give their children a good whipping, yet these same parents are blamed by Tony Blair when their children turn out bad. (Contentious issue, I know, but I will point out that there is a difference between chastisement and inflicting violence. On my side of this argument, I have no less an authority than the Bible. Proverbs 13.24, since you ask.)

Children are tough young things, and well able to weather some of these things that we feel would cripple them. Mother going out to work? That’s nothing! I was brought up with the sort of studied nonchalance that would have landed my parents in jail were it to happen in this day and age. I don’t think this harmed us in any way. My mother went out to work. It didn’t even occur to me and my brothers that it could be any other way. My parents frequently went on their annual holidays around Europe and America while we stayed at home with our grandmother and uncles. I remember they once went on holiday and left us in the care of a slip of a girl who had just finished her A’levels. We were all happy with the arrangement. For us, it also gave us a break from our parents for a month, and we could hardly wait for them to leave. I still remember the jubilant celebration as they drove off to the airport that night. However, if that were in these times, my dear mother would have been on the front page of the Sun, above the caption ‘Monster Mum leaves Tots for Month-long Jolly’.

A recent study on happiness has just shown that, contrary to what we may think, having children does not make us any happier. So why are we sitting here pretending? Because we feel too guilty to admit that. For the most part, guilt plays a huge part in our relationship with our children. We know it. The tabloids know it. Trisha Goddard the chatshow host knows it. The Government knows it.

So what can we do about it? Nothing much. Accept the truth. Accept that with children, we can never be 100 per cent right. Accept that Princess Michael of Kent was right when she said earlier this year that the English take the breeding of their horses and dogs more seriously than they do that of their children. To quote her, ‘God forbid that the wrong drop of blood should get into their Labrador, but their children marry however they wish’. Accept that, and get on with it.