Chancellor George Osborne has stated in recent days that the “storm clouds” are gathering, and we should all expect a difficult few years with slower growth and potential global economic turmoil.
When an actual storm is approaching, those who prosper are the ones who make preparations, and protect their homes and assets from the oncoming danger. George Osborne will argue that is what the government is attempting to do currently. With public spending cuts, and tax reform he is currently trying to reduce the deficit and “repair the roof” while the current weather is relatively “sunny”.
The UK economy in recent years has improved; unemployment figures have dropped and the UK population is spending again.
Last week, data by Travel Weekly sister title “Travolution” announced that “Combined travel agency and tour operator turnover in the UK increased for a sixth successive year in 2015 to almost £32 billion”.
This means that families and individuals are going on holiday again, which is always a good yardstick as to how the economy is currently performing.
However, for every piece of good news, there are some warnings. An economic shadow does seem to be cast by the level of UK debt. Britain’s £1.5 trillion debt pile has continued to rise, leaving many experts to state that Mr Osborne’s pledge to cut the national debt relative to the size of the economy will probably be missed.
What options are available to the Chancellor? Cut public spending or raise taxes? In reality it’s most certainly both.
The Chancellor does have his hands tied to specific changes. His Government will certainly not raise income tax, national insurance or VAT, as this will go directly against the Government’s pre-election pledge. What recent history shows is Mr Osborne’s willingness to use unpopular “stealth measures” and implement new categories of Tax. Our last emergency budget pays testament to that, with the introduction of the controversial “dividend tax”. Since then we have seen an increase of Stamp Duty on second homes, and restrictions to higher rate taxpayers who own investment properties.
In two weeks, what can we expect from Mr Osborne? According to the Telegraph, currently thousands of savers are rushing to move money into their pensions, fearing an imminent cut to higher rate tax relief in the Budget. Their fears could prove founded as it looks as though Mr Osborne will look to make reforms in this area.
We will expect the usual government response; to cut back on Tax Avoidance. The real question is, however, will our Country’s SMEs be made to pay for big business tax avoidance? This has been the real shift in trend, potentially cemented by the publicly criticised “modest £140 million tax settlement” agreed with Google.
The Federation of Small Business (FSB) has called on George Osbourne to focus on support for enterprises, business rates reform and the simplification of taxes in the 2016 Budget Statement. The FSB have stated that SMEs have enough to deal with, including the introduction of the new National Living Wage, quarterly digital reporting and Pension Auto-Enrolment. We would agree with the FSB, but will Mr Osborne? On March 16th we will find out.
Whatever the outcome, expect to hear more about “World Economy Turmoil” as Mr Osborne pushes forward to cut the national debt.