Thursday 24 March 2011

The Chancellor giveth...

…and the Chancellor taketh away.  For all the huffing and puffing by politicians trying to say either that the budget was divine, or else that it was the work of the devil, it looked like a bit of a non-event to me, from the point of view of the average punter. 
For everything that was given with one hand, something else was taken away with the other.  Given the direction set by his first budget last year, and the complete absence of any advance indications of Damascene conversions, that was all that could realistically be expected.
His attempt to simplify the tax system, by moving towards a merger of income tax and NI as well as removing all sorts of obscure rules is one of those things that sound superficially attractive – after all, who would really want to argue that tax should be complex if it can be simple?  The devil, though, will be in the detail.  I’d lay odds that a lot of the obscure rules were introduced to plug loopholes, even if those operating the system have long since forgotten what those loopholes were.  The clever accountants will soon enough rediscover them though.
The headline was the action that he has taken on fuel taxes.  Rarely can so much fuss have been made about so little.  Reducing the amount of tax paid at the pump by increasing the tax on the oil extraction companies might appear to reduce the proportion of the pump price which is directly attributable to tax, but it might also turn out not to have as much impact on the total price as people expect.  Taxes on companies have a habit of ending up factored into the end price eventually.
What he has emphatically not done is introduce a fuel price stabilisation mechanism, and it surprises me that anyone could think that he has.  Whether the price of fuel goes up, down, or stays the same during the remainder of this year is not something I’d like to predict; but we can be pretty certain that whichever of those happens, it will have little to do with this budget.
One thing that the budget does underline though is the extent to which even a budget which is neutral overall can involve a number of changes to a number of taxes in order to rebalance the sources of government income in ways which the government obviously hopes will achieve its desired outcomes. 
That’s an important factor to consider in looking at what taxation powers should be devolved at some point to the Assembly.  Power to change one or two might well give the Assembly a degree of responsibility over its own income; but serious economic power means being able to vary a number of taxes in combination.

1 comment:

Anonymous said...

This blog deserves a comment
The Budget was a non event
The penny off petrol is taking the proverbial P***
Fuel is the lifeblood of our essentially rural country. Recently we have been told that sheep numbers have fallen by 25% in recent years and that there is a possibilty that cows and beef cattle will soon join pigs as rarities in the Welsh landscape
If we are looking to England and Westminster for help then I am sorry to say that we are going to wait in vain
It is essential that we gain greater control of our own affairs We in Wales are no less a people than those in Egypt and Libya. The desire for self determination and independence are global desires of people everywhere