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Robert:

Not surprised with the splits between the parties in how they will assist businesses in the United Kingdom and, also, during the forthcoming budget that will be delivered in the U.K. House of Commons...

Not advocating and associating with any Political Parties in the United Kingdom, and, this is my own opinions...

(DENNIS JUNIOR)

More buggering about with allowances for political points.... I for one am looking forward to hearing how much better this is than the Tory proposal.... oh dear...

Prepare for Count Mandelstein to appear Smug and Supercilious on a TV near you!

One clear difference is that allowances are linked to investment.

A reduction in headline tax rate makes no such link, with corporations free to pass the savings onto shareholders, or line the pockets of execs.

If we're going to spend government money on reducing the tax burden of corporations, I know which I prefer of the two: it isn't the one that lets execs give themselves bigger bonuses.

Surely not yet ANOTHER Conservative idea nicked and respun by Labour?!

No wonder Cam and Co keep their cards close to their chests!

Never mind, Mr Cameron, imitation is the greatest form of flattery!

This comment was removed because the moderators found it broke the house rules. Explain.

The point is that George Osborne, the shadow chancellor, has already announced an ambition to phase out capital allowances in order to pay for a reduction in the mainstream corporation tax rate from 28 per cent to 25 per cent and in the small companies' rate from 21 per cent to 20 per cent.

I hope you're right Mr Peston.

In 2007 – 2008 the writing down allowance for plant and equipment was
First year 50% (Small firms)
First year 40% (Medium firms)
All firms 25% on reducing balance

By 2009 – 2010 that had dropped to 20% across the board. Which may go some way to explain why firms are no longer investing in new equipment.
Be interesting to see if it changes.

Re post 7 I add as follows:

Oddly enough it was the same for cars.

In 2007 - 2008 you got 25%.

Now you're down to 10% - 20% depending on emissions.
I wonder if that helped slow car sales down.

6. At 07:48am on 24 Mar 2010, den wrote:
'The point is that George Osborne, the shadow chancellor, has already announced an ambition to phase out capital allowances in order to pay for a reduction in the mainstream corporation tax rate from 28 per cent to 25 per cent and in the small companies' rate from 21 per cent to 20 per cent'

That's not going to go down well with those who wish to invest in new equipment.

@9 But it is going to go well with those who want to increase their bottom line (and hence their remuneration).

How to help business?

Keep your thieving hands out of the till, and stop treating businesses as criminal organisations.

Why are we, the tax payer and voter, worried about Darlings budget ? HE should be worried about us ! It seems typical of the stranglehold this Government has on the taxpayer when they can treat us however they want.

If someone had the guts to stop the epic waste in Government and slash the useless dictatorial quango's we could cut taxes without any loss to "genuine" public services. I suspect the conservatives will just carry on the grandstanding and looking after the old boy network just as much as the inept administration has.

Too many quangos and underworked, overpaid dictators are making for bullying and overtaxing of the British people.

A shambles, made worse by the media making Darling feel even more important. Bah Humbug !

I'm in favour of tax simplification. The current system is open to abuse because of its complexity - and that is as much true of personal taxation as it is of that which applies to companies. The more complex, the less fair as well.

Tax companies based on PROFIT made, not turnover. Until you have paid your bills, you haven't made a profit however much money has come in. (If nothing else, it might encourage the slow payers to cough up... money paid to their creditors is not available to the taxman!)

> As I have reflected before, anti-interventionist New Labour has - at the
> end of its third term in office - rediscovered an enthusiasm for
> intervening in the market before breakfast, lunch and tea.

Well, it had little choice about intervening in the banking
market - the free market had destroyed itself, and it threatened
to destroy us, as well.

So, the pure free market model is dead, which killed anti-interventionism
at the same time.

No surprises after all.

The idea that Labour is pro-business is laughable. They are pro-Unions, pro-public sector and pro-spend, spend, spend - come-what-may.

Far from encouraging a private-sector growth this government has president over bloated growth of the pubic sector over the last 10 years - at the expense of the private sector.

When Brown talking about "creating jobs" he means the taxpayer paying people to dig holes in the road for their own sake - not creating incentives for businesses to invest in UK Plc.

This comment was removed because the moderators found it broke the House Rules.

I’m sat here with not much to do this morning, so thinking about the budget seems a perfectly reasonable distraction.

Having so thought about it, I concluded that I wasn’t so much bothered about the contents of the budget, but more what they used the money for.

I would be happy to pay tax if I could somehow arrive at the full and complete belief that the money would be used sensibly.

This is not clear red water, Robert, it is called Michael Hesseltine.

So thirteen years after dumping Hessletine's interventionist policies New Labour is making a death-bed conversion after presiding over a bigger collapse in manufacturing employment than that achieved by the Blessed Margaret.

Whilst I am enjoined never to prefer the death of a sinner but that they come to true repentance, I would think the hard-pressed taxpayer would prefer something more structured than what is clearly a party political point to be scored time and again during the election campaign.

Whatever this government may argue the reality is that they are not to be trusted and must go. These policies would have been better presented a year ago by a Labour government headed by somone else, if you get my drift. There is no way I would vote Darling to get Brown, again. He is not to be trusted; his government is not to be trusted and it must go.

The stables need to be cleaned out, hosed down and new straw laid fresh. This is a good time of the year to do that.

Capital Allowances have been consistently abused ever since they were invented. The main purpose of capital allowances was to allow banks to reduce their tax bill (after all that is the main purpose of plant and equipment leasing). Now that banks have such large losses to carry forward there is no need for them to take advantage of increased capital allowances, and as small companies find it virtually impossible to borrow from banks to fund capital investment, the whole concept of capital allownace increases seems, at least to me, to be fundamentally flawed - unless of course the aim is get headlines not results.

Conservative policy of scrapping the allowances to cut corporation tax is far more likely to result in real investment because it leaves real companies with more money in the kitty.

I would also like to see a policy of curtailing the losses the banks can carry forward against future profits - otherwise it will be years before the banks pay any taxes at all

So we either have:
a) Fiddling with allowances which will require more staff to track, monitor and investigate
b) Reduced tax which would allow for reducing the number of inspectors needed.
From personal experience, the inspectors do not understand the rules themselves so there is an overhead on business and public spending. I, therefore, would go with b)

What a shambles!

We've all become used to sitting down to watch Corrie and Enders already knowing the story from the morning or weekend papers . . . .

. . . but I was of the understanding that "All government announcements were firstly to be made to the House of Commons", or did I imagine that!

#17 Dempster
"I would be happy to pay tax if I could somehow arrive at the full and complete belief that the money would be used sensibly."
I think it will be a very long wait....

To 19. At 09:48am on 24 Mar 2010, Justin150 wrote:
'Conservative policy of scrapping the allowances to cut corporation tax is far more likely to result in real investment because it leaves real companies with more money in the kitty'

You can't scrap capital allowances unless you make the purchase of plant and equipment the same as the purchase of consumables.

Because if you did, no one would want to invest in any machinery or equipment for their business, as they woudl not be able to off-set against tax.

What about a 100% tax on government lobbying?

...that should generate a fair bit!

This will be a mild, voter friendly budget so far as possible.

An irrelevance, because the real budget (an emergency one)will be called shortly after the election.

Cutting back on public sector investment and spending will not help the private sector which needs customers and orders to make the government assisted investment worthwhile in commercial terms. Reducing business taxes may help with cash flow (and executive bonuses) but business needs acttivity for the reduction to be turned into jobs and investment.

"Labour would be directing tax relief to particular sectors, such as manufacturing - on the basis that the UK needs to stimulate certain kinds of industries, especially those able to generate increased exports and close our trade deficit."

Too little and Very very late!

"The chancellor would argue that this is particularly important after a year in which business investment has collapsed."

You don't say!

"However the Tory position is very different: George Osborne would say that the private sector is best helped by lowering the headline rate of tax for all companies, and allowing the market to determine where capital should be invested without the alleged distortion of differential tax breaks."

....And the Tory view is..."Let the market decide!" Oh gawd, nothing's changed....

Yet pensioners and the poor really want to vote Labour or Tory?

They said on Radio 4 Today that the government spent £57,000 on
those little red boxes used to carry bits of paper. Evidently, they
are made from the finest materials and last a long time. The one
used for the budget looks pretty battered.


Those should be the first things to get cut.

The budget sets out the election

1 labour stay in off it goes
2 labour lose all of the budget goes, just because..

More the start of playtime for politics.
My guess of drink goes up , fuel goes up national insurance goes up
Country debt goes up.

No good news. On if Mr Darling trips up outside no11

# 20. At 09:53am on 24 Mar 2010, yam yzf wrote:

> b) Reduced tax which would allow for reducing the number of inspectors needed.

Go after the toffs, I say, and quit bothering me about tax and whatnot.
I need all the money I can get, but the toffs just waste thier money
on luxury stuff. Go after them for money - they reckon they've got plenty.

Why are we all bothering to comment on this complete charade!

The rich got a whole lot richer under New Labour...and the poor got...well...a lot poorer (via privatised profits and socialised losses etc.)

When the new Government gets in (New Lab, Cons or Lib/Lab or Lib/Cons or whatever)

...guess what!

The rich will get richer and the poor will get poorer.

Capitalism doesn't work for the good of all.

#17, 22

This squandering by government of the tax take has to stop.

Forget strikes... we need to collectively withhold paying tax. Peaceful, non-confrontational civil disobedience country wide...

Surely, the real difference between a tax cut and abn increased allowance is that the tax cut costs money up front. An increased allowance sounds good but will only cost money down the road -and only then if companies acutally start to invest.

#19 Justin150 unless?)"Of course the aim is get headlines not results." (C:

More Stolen Conservative policies!

I don't see this making any difference to small business, Annual investment allowance up to £50,000 replaced capital allowance, given that most small business that I know who were cash rich with no debts replaced vehicles during the scrappage scheme I can't see how even increasing the AIA would tempt many who have hunkered down to get ready for the storm would be tempted to splash out.
One thing I would like to do is buy instead of rent the workshop we are in, but the landlords will not sell as the prices are falling, and I certainly won't be paying to inflate any new bubbles

As a small business we have to continually purchase new equipment in order to keep up-to-date with our customers. Under the 'New Labour' regime, these costs are, in effect, revenue expenses. Under the 'Pro-business Tories', with reduced capital allowances, we would pay up to 4 times as much in Corporation Tax for many years.

It is a no-brainer. The question is, who is short of grey-matter?

However the Tory position is very different: George Osborne would say that the private sector is best helped by lowering the headline rate of tax for all companies, and allowing the market to determine where capital should be invested without the alleged distortion of differential tax breaks.
All companies? He means those companies run by his mates need some help to line their own pockets further. The poll expert said Georgie comes in as the last choice for Chancellor! No one believes he's up to the job and the truth is he isn't up to the job.

Dudley, featuring heavily on ³ÉÈËÂÛ̳ News 24 today, along with all those places in the UK that have been struggling since the days of Thatcher will be milked yet further, will suffer more cuts, more poverty and more hopelessness by any Tory government.

Now, here is my question Robert. Are we or are we not in a liquidity trap? If we are what will any of them do to sort that out and how long will it take?

The headline says council tax lowest rise, but it fails to say that the under the Conservatives it will be frozen for 2 years with no rises at all.

"Prepare for Count Mandelstein to appear Smug and Supercilious on a TV near you!", but that's his job!

Thanks Robert for this indication of how the two main parties differ on the subject of how to treat businesses in terms of Capital Allowances and Corporation Tax.It is also interesting to see other posters explaining how this government has varied Capital Allowances in past years.

Having read notayesmanseconomics critique of the proposed moves for Stamp Duty and the nationalised banks I feel that I am now ready for the event itself!

"the Labour/Tory split on how to help business"

...and neither plan will help any business except giant globalised conglomerates.

Why would anyone want to trust the two parties that brought us here? (because there's been nobody else running the country for the last 40 years)

This is a stupid budget, the only benefit could be if darling announces harsh cuts to 'impress the market' - which will last about 3 days before the markets realise 'he might not be around to implement them' (they're none too clever these markets) - or he can do a giveaway budget (although I can't ever remember any budget giving anything away) which will spiral our debt costs as the markets react to 'fiscal ill-discipline' (which means how many services are you prepared to place on the sacraficial altar to please the Gods of markets)

What is certain is this budget will change very little and is destined to be a huge anti-climax.
Still it does give committed bloggers and journalists something to discuss all day....

#23 Sorry but I think you are wrong. Lets take the most favourable case (50% capital allowance) and 28% corporation tax.

If a company spends £100,000 of new capital allowances in year 1 it reduces its tax bill by £14,000. What I cannot remember is whether capital allowances in year 2 mean the same £14,000 tax saving (and nothing thereafter) or whether capital allowance are assessed on the depreciated value so in year 2 you get a 50% allowance on £50,000 (being the value left over after the year 1 allowance).

Either way if a company makes £500,000 profit and scrapping the capital allowances allowed for a 3% reduction in corporation tax a company would be better off in cash terms than having a capital allowance complexity.

Of course this goes against politician instincts because leaving companies with more cash will mean some do not use it for investment - but my view is always that it is better to simplify tax and leave companies to make their own decisions about investment based on need rather than tax treatment than try to encourage a politician's view of what companies should do by creating complex incentives which will only get abused

15. At 09:23am on 24 Mar 2010, No more boom and bust


Are unions as much of a dirty word in Germany? Aren't they, who manage to work really effectively with their unions doing much better than we are, then the US and Canada?

"These include a government-funded venture capital fund, which is being dubbed the new 3i and would provide modest amounts of equity finance for smaller businesses.

It is supposed to co-invest with the private-sector in technology-based companies, such as those in life sciences, digital industries, and advanced manufacturing."

Scottish Enterprise has been running such a fund for a number of years. Its success is dependent on the availability of private sector funding. Sadly, this has not been forthcoming in anything like the quantities we really need and I don't see given the attitude of the UK financial sector I don't see that changing.

Oh No - is there no end to the bubblenomics of Government!!



Is that how recovery is envisaged? Subsidise property values so that the overstretched consumer can re-mortgage and fill the consumption gap.

can't they remember how that turns out?

If this is true - then the Government are truly morons and we had better get rid of them before they make the situation irretrievable.

....and the alternatives present nothing different, merely tinkering with the fluffy bits - they are all committed to put the Capitalist system before EVERYTHING.

38. At 11:05am on 24 Mar 2010, PalusKeg wrote:

"The headline says council tax lowest rise, but it fails to say that the under the Conservatives it will be frozen for 2 years with no rises at all. "

Would that be like the "No new taxes" promise George Bush senior gave?

Are you really still falling for that old trick? - so how can the Tories freeze Council tax for the next 2 years and cut the budget deficit?

...oh wait, let me guess, they're banking on a massive turnaround in growth, and when it doesn't come it will be too late - they will be in charge.

At 09:48am on 24 Mar 2010, Justin150 wrote:

Just for clarity, while most large businesses may corrupt any tax law, most small businesses will benefit from increased capital allowances.

Let me give you an example. I sell professional tools which cost about £2-10k to companies with turnovers about £100-300k. These type of companies cannot get easy loans, becuase of the banks attitudes, and buy everything from cashflow. They are also usually 100% owned and run by the directors.

So if they make £10k profit, they could buy my kit, but currently they could only get 20% allowed against tax. So in the year they buy it, they would have to find the £10K to pay me, plus the tax on £8K (100-20% * £10k). That is, even though they are using the tool to be more productive, increase sales & exports etc, it will cost them about 120% of the tool cost from their precious cashflow to buy it in year 1.

Instead, the directors may decide to tax the whole profit as drawings, and pay the normal tax on it, as at least they'll have some benefit that year.

This is simplistic, but you can see that capital allowances are very important to how small business decides what they can/ want to buy.

A 100% capital allowance for companies with profit less than £1m would boost investment in the UK, without too much abuse. Now of course all you need is UK companies to make the tools they want, but that's another story!

A financial budget simply can not solve the problems - only tinker with them.

If I was a rich person 30 years ago I would employ 50 people for 40 years to make me money.

In the last 30 years the working population has grown.

Now I would buy a machine that would take 20 people 6 months to make and employ 5 people to use it and 1 person to repair it.

This ignores the fact that I would probably import the machine which increases the problem and ignores the fact that the ageing population need looking after.

Too many people not enough jobs - why is this not obvious in the job market?

Because the jobs are being created in the public sector just to keep the unemployment down and prevent civil unrest. But the upshot is huge deficits as private sector taxes can't pay all the public sector wages and health and pensions and education etc etc.

The problem does not require financial tinkering - it requires a complete new blue print.

...oh I get it now....hold a pointless budget to divert attention from REAL events....



Luckily while Darling is fiddling with his briefcase - the working class are getting on with their part to play.

Soon we will have strikes on the planes, trains, tubes, buses, civil service and even the gas man is downing tools.

WE WON'T PAY FOR YOUR CRISIS.

Can anyone else feel the twitchyness of the markets now that they realise the tax paying working class might not be ready to bend over and take the pain of austerity?

Uh oh - didn't think that would happen did you?

I must admit I incorrectly predicted the winter of discontent - but it should have been the spring / summer of discontent. However this bad prediction is still a million times better than most Economists, Government advisors or the Chancellor himself.

I'm no genius - it was obvious.

Has anyone noticed there is a general strike in France this weeek?


Come on Britain, you're not going to play second fiddle to the French are you?
They are showing us how a revolution is done - they don't spend their time moaning about their poor lives - they get off their backsides and make it clear.

Vive La France mon amie!

Clear red water, judging by the cynicism of the blogs I would say not, for the avoidance of doubt, I certainly don't criticise being cynical.

The problem with a non-interventional approach is the implicit assumption that the free market works and is self controlling. The reality is that banks become larger and larger, to the point of being able to abuse their power, investment becomes based on pure speculation, and the economy skewed away from those who actually produce. (WOTW can and has explained this much better than myself)
The playing field is not level to start with, frankly IMO, if we are to build on the proud history of our industrial heartlands as opposed to continue to kill it off, it needs very concerted help

15. At 09:23am on 24 Mar 2010, No more boom and bust wrote:

"Far from encouraging a private-sector growth this government has president over bloated growth of the pubic sector over the last 10 years - at the expense of the private sector."


That's funny - I didn't hear anyone saying that when the boom was on? Maybe you just a problem with perception. When the boom was running the public sector seemed tiny (because the private sector was 'producing' so much) - however the private sector walked off the field in 2008 - leaving the public sector looking huge.


"When Brown talking about "creating jobs" he means the taxpayer paying people to dig holes in the road for their own sake - not creating incentives for businesses to invest in UK Plc."

...investing for what purpose? - to make profit - and where does that profit come from?

It seems to me 'companies investing in the UK' is actually a bad thing in the long run - or maybe the staff from Cadbury's would differ?

I wonder who is paying their unemployment benefit now? - would it be those lovely companies who 'invested in the UK'? - or do most of those foreign based corporations actually avoid UK tax?

can you tell me where to get some of the '2.5 billion' for bisniss or would I be right in assuming it's actually impossible to tap into and just more 'look good' and 'talk the talk' Brownite hogwash? Presumably it all goes to banks eh Rp and you apply there?



GC

One other note.

If a small company has generated profit, say £100k. Here are some options on spending it (note figures are approximate):

1) Pay as wages/ bonus. Tax cost is nominally 22% plus NI plus employers NI = about 35%. Employees get 65K, taxman 35K
2) Buy capital goods. Goods can be worth about 80K max, taxman gets 20K ( over the next 5 years, the company gets a diminishing tax rebate however)
3) Give to directors as drawings. Directors get 63K , taxman gets 37K
4) Keep it as savings. Company banks 72K, taxman gets 28K

If they could get a loan, they could buy the capital goods on a 5 year loan. The capital repayments come out of cashflow ( not taxable), the interest on the loan is discounted by 28% and they get the capital allowance against the current profit.
But they can't get a loan.

# 42 Justin150

respectfully (imo) i can see Dempsters arguement a little better. I'm not going to be silly enough to point out fine tuning in what is clearly a broad brush approach, but one point i would make is that the 3% reduction is for company's whoes profits before tax is over £1.5m, company's of £0.5m profit will have existing transitional relief, i'm not boring enogh to try and calculate the effect of this .

My main point is for your analysis to be correct,i.e.companies to be better off without capital allowances the company has to make over £0.5m, possibly over £1.5m profit per annum for UK Tax computations each year in the first place.

I suspect most of UK's manufacturing base would settle for profits of this level.

Neither of us know how many companies this is, but i suspect not many. The best info my quick search has found is that in 2006 60% of Britian's 700 biggest companies paid a total of £10m tax to the UK, 30% paid none.

I know i bang on about this but it is estimated £12bn of tax revenue each year is lost to UK revenue from "clever" corporation tax aviodance schemes alone, e.g. moving paitents to different contries, not being UK based for tax purposes. Large audit firms charge up to £500,000 for a method not to pay UK tax.

To be unbiased, i will slightly disagree with Dempster too (imo), this money has to be made up and the loyal Jo or Joe public taxpayer are again the people who do this.

So has this budget just delivered a whole raft of measures never to be introduced as we're weeks away from a general election!?

It's good to know that Darling has gone straight down the middle and taxed everyone!

What we really needed from this budget was some long-term thinking to prevent huge rates of public borrowing to halt the current ridiculous 25% of government spending being borrowed.

The Jury Team have set out the need to limit borrowing to 10% of total spending.

This gives the only real chance of long-term, lasting reform.

Instead of real leadership we see more taxes on the poor which amount to nothing more than pre-election gimmicks!

48. At 12:35pm on 24 Mar 2010, GRIMUPNORTH77

Agreed.

First we decided to increase the numbers going to university. But we had no jobs for them to do once they graduated. And I'm not talking about the number of golf course design graduates.

For years there have been problems for a whole host of good quality graduates finding jobs. Why else would there be complex recruitment practices to find 'the best'. In other words, industry could take one or two from a hundred or so. The rest then re-enter university to take a Masters in the hope that will allow them to seem more like a good catch for an employer, avoid the dole, take office junior jobs etc. Yes folks it takes a university education to stuff envelopes! I've even seen science PhDs being forced to take jobs as receptionists or selling door-to-door make-up (you know the company) after a year or two of working for no pay, hoping against hope that funding will arrive to pay them a wage.

It isn't about graduates thinking they are too good to stuff envelopes. There is nothing snobby or elitist in saying that it is nothing but a waste of fantastic talent. We waste our own, our best resources, our own talented and able people after first promising them careers if they load themselves with massive debts.

Just look at the massive increase in the shocking and abusive 'internships' where graduates are now working for no wage, not even bus fares!

51. At 12:48pm on 24 Mar 2010, writingsonthewall

Who was it that said that so far in this crisis the Stock Market has predicted six of the last zero recoveries ?

@47, 53 crookwood

Interesting comments.

If a company was allowed to retain profits tax-free for working capital or investment, that would make a tremendous difference to the economy.

The money would be in the hands of those who could use it properly, rather than in the hands of the government who would waste it or the banks who would gamble with it.

I whole heartedly agree with 4.s comments. No wonder Mr Cameron and co are playing their cards close to their chest. If they speak them, then Labour tweak them and then announce them as their own. I guess we'll just have to trust that they (Mr Cameron and team) will do a better job than Brown and co. Lets face it people they certainly could not do any worse. I genuinely believe that Mr C. will do a better job and he cannot be held responsible for the actions of the Tory's at a time when he was still in school. Coming from the valleys of South Wales to say I now believe is a major step. All we need now is for the rest of the people to believe and once and for all vote for a change of government.

Genuine help for small businesses would be welcome, using small businesses for political gain is not.!

with Alistair Darling stating that sickness must be at a lower level, i am sitting at home with a broken leg WANTING to go back to work but as im a driver that cant happen for 8 more weeks

"George Osborne would say that the private sector is best helped by lowering the headline rate of tax for all companies, and allowing the market to determine where capital should be invested without the alleged distortion of differential tax breaks."

Differential tax breaks distort efficient capital allocation?! What planet is George Osborne from? Under his system, if I fritter my money away on expenses I reduce my tax bill, but if I invest, and improve the productive capacity of my company and thus the nation, I am taxed more! How does that help better investment decisions?

He has found a way of providing a permanent tax disincentive to investment. Genius.

This policy would only increase fiddling, as investments become, essentially, a post-tax item. This means that the incentive to class investments as tax allowable expenditure will be greater than ever. Those thinking this is a simpler system to police are sadly deluded.

I must also say that I am genuinely amused by posters like #59, blithely assuming Labour are stealing the Tories ideas. Labour are proposing the opposite. Here's a hint: If you don't understand what the grown-ups are talking about, you appear wiser if you remain silent.

Our ten-year budget analysis reveals yet another perspective on the budget and, in particular, on the crisis which you may find interesting:

See

Sabine
Organiser, Forum for Stable Currencies