There aren’t many options available to the Chancellor in next week’s Budget, argues Dean Jones, head of paaleads.com.
Chancellor Alistair Darling last week warned people not to expect a budget ‘giveaway’ when he divulges the contents of his red briefcase on 24 March.
This year’s Budget will be one of the most political of recent times, and given the economic backdrop and impending general election, there will be intense scrutiny from the public and private sector. More than ever before the voting public will be looking to the Chancellor to convince them he is the right man to hold the country’s purse strings into the future.
The Budget decisions that consumers care most passionately about, and will be most vocal about, are always around tax. As a result, it’s more than likely that this year the red box will not contain significant tax announcements as the Chancellor seeks to keep voters on side.
Whoever does win power in May faces an incredibly difficult economic situation that will need effective decision making to ensure the financial services sector is able to sustain the recovery from last year. For us in the adviser market, our attention will be on a certain number of key areas within the budget.
One of the most important is stamp duty. The debate and then any movement on one of the oldest taxes in the Budget is crucial because of its knock on impact on the stability of the housing market. Last year’s temporary holiday of the lower rate was welcome relief, however house price inflation over the last twenty tears has meant that a permanent redress of the brackets is desperately needed.
The stamp duty ‘holiday’ of last year did lead to an increase in first time buyers in the market, yet didn’t lead to a significant bounce in house prices that many expected at the turn of the year. Indeed, latest CML figures show that loans to first time buyers fell by 54% from December to January, with overall loans dropping by 49% in the same period.
However, there are some signs of positive change in the house market, evidenced by the number of lenders launching new products including at 85% and 90% LTV, but we are still some way from saying there has been a full recovery.
IFAs and brokers up and down the country would, I am sure, welcome with open arms a significant change to stamp duty, but I cannot see Mr Darling making any dramatic changes this close to the country going to the polls.
Of course, for most of us the real issue is what happens post election, and whether the advice industry is given the necessary support to encourage growth in what is the most important part of the British economy, financial services.
For that, I am afraid we will have to wait a little bit longer.