Autumn Statement - A bit of give and take
Chancellor Osborne approached his Autumn statement in the sure knowledge the economic trade winds have shifted in his direction with a significant upward revision of growth figures by the OBR. This provided perfect ammunition for the salvos that he unleashed on the unfortunate Shadow Chancellor.9 December 2013
The neatest summary in the acres of coverage penned was by Benedict Brogan of the Telegraph;
“Comeback for Osborne, disaster for Balls, glimmer of hope for Tories, ominous consequences for Labour, nagging doubts about the economy, terrible truth about public finances, and a long haul ahead for Britain.”
The highlights of the statement are summarised in the infographic kindly supplied by Cicero.
There were a number of measures targetted at overseas investors and non residents with estimates of the additional revenues that might be generated in order to fund a broadly neutral budget with some giveaways.
The HMT scorecard tabulates the measures and estimated revenue gains:
The big lines are acting on onshore employment intermediaries and the extension of the partnership tax changes to cover principally Hedge fund managers. Neither are likely to impact on Jersey significantly and in fact should lead to even more Hedge and PE Managers looking at relocation to the Island to mitigate an ever rising tax burden.
The CGT on non residents was widely trailed and I don't think this will deter real estate investment into the UK by foreign nationals but it is a bit tough on the hardworking expat if they end up paying CGT on the sale of their principal residence. The rules on this are changing and won't become clear until a consultation has completed in 2014, so some way to go yet.
The action on High Risk Promoters is welcome as it cuts off abusive tax schemes at source and they are less likely to be billeted in Jersey as a result. The advance cash payments on schemes which have been successfully challenged will also act as a deterrent to this kind of arrangement.
In the round a bit more chipping away at non doms, high earning alternates managers and non resident investment into residential property, but nothing too dramatic.
The really interesting aspect of the Autumn statement and the accompanying figures is how important economic growth is to national budgets, dwarfing the tax aspects that have dominated the headlines for too long. The tax avoidance programme in this statement announced the largest ever package of measures, estimated to raise £9bn over 5 years, or a little less than £2bn per annum. Given the national debt is £1.2trn and the annual deficit still around £110bn, the avoidance figures are tiny by comparison, largely because most people and businesses pay their fair share of tax already.
In contrast an additional £10bn pa will be generated as a result of the revised growth numbers. Focusing on tax is necessary but focusing on the levers of economic activity is infinitely more important and where real policy effort should be applied.
Which reminds me of a couple of my favourite Churchill quotes:
"We contend that for a nation to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle."
"Some see private enterprise as a predatory target to be shot, others as a cow to be milked, but few are those who see it as a sturdy horse pulling the wagon."