The British state is at war – on terror, poverty, manufacturing and light bulbs...
Politics / UK Tax & Budget Mar 23, 2007 - 08:28 PMBy: Adrian_Ash
FAT TONGUE placed firmly in cheek, the British chancellor – Gordon Brown – pulled off his greatest feat of magic in 10 years of trickery at Westminster on Wednesday.
"Abracadabra," he shouted for 54 minutes...and poof!
Nothing had changed except the detail – and the press coverage. He got the headlines alright. Even the press knows to watch his sleight of hand these days.
Now that's magic!
The detail's so dull, in fact, that only London's army of financial hacks could spin it out to 20 pages packed with "analysis". Gordon Brown's swag-bag was £1 billion lighter in 2005/6 than he had projected. Now he reckons he'll nab £1 billion more in 2006/7 than he forecast 12 months ago.
A billion here...a billion there...who cares? The Cabinet Office alone will spend £2.4 billion this year. On what, you might wonder – new mugs and biros?
But discussing policy doesn't come cheap. Keeping the New Labour leaders in tea and biscuits will cost 9% more in 2007/8 than it did during the last fiscal year.
You gotta keep the troops' strength up, of course – and war never came cheap. Now Westminster is waging war on terror...poverty...light bulbs...and what's left of British manufacturing.
The only thing sure to benefit is inflation. Everything else cancels out.
So what if Gordon Brown knocked 2p off the basic rate of income tax? He more than doubled the tax rate on your first £2,000 of taxable income...
He cut 2% off corporation tax, but excluded anyone investing in plant...
R&D firms got a £100m tax cut, but the punitive charges on North Sea oil & gas firms remain. Better to trade "carbon credits" than squeeze the last few drops out of Britain's domestic resources. Offshore hedge funds trading these 21st century indulgences will now enjoy zero tax...
He also gave fresh tax breaks to "sukuk" investors looking for financial products to comply with Koranic law. But he raised the tax-rate paid by very small businesses. A smart way to encourage risk-taking outside the financial markets!
He gifted free money to property speculators too, sharing the tax advantages of REITs with unit trusts invested in real estate. Their number has swollen from four to 15 over the last two years. You might wonder where the value-added lies here, but so what? That kind of growth at M&G and New Star deserves recognition – as do second-home owners buying property overseas.
Cutting income tax charges on holiday homes will reward just 2-3% of British adults, says the Financial Times. Failing to cut the 70% charge on pension assets passed onto your family, on the other hand, hurts everyone wanting to save for the future.
"Mr Deputy Speaker," said Prudence through his newly-white teeth, "I want to send a signal about the importance we attach to encouraging saving." Raising interest rates would make a start. For basic-rate payers in Britain, cash in the bank now pays minus 0.4% after tax and inflation.
He also recalled his "ambition of...two million new owner occupiers." Yet again, higher interest rates would actually help here. Even Mervyn King at the Bank of England knows that cheap money has failed to cut house prices! Meddling with shared-ownership schemes only pushes property inflation higher again.
Not that it matters, of course. No budget from Culpability Brown, Ed 'Chocolate' Balls, George Osborne or any other buffoon could halt the trend towards big government. By definition the modern state steals your money just to give you it back at the government's discretion and a time of the bureaucrats' choosing.
Better look after yourself. Get what wealth you can to safety. The ballot box will only ever pay dividends if you sneak into Westminster – or Washington, Brussels, Canberra, the Kremlin or Auckland – and grab a few non-exec directorships alongside your tax-funded expenses.
By Adrian Ash
Adrian Ash is head of research at BullionVault.com , the fastest growing gold bullion service online. Formerly head of editorial at Fleet Street Publications Ltd – the UK's leading publishers of investment advice for private investors – he is also City correspondent for The Daily Reckoning in London, and a regular contributor to MoneyWeek magazine.
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