“During his 50 minute Budget speech Mr Darling announced a pot pourri of measures and initiatives designed to help the UK economy “Invest and grow our way out of recession.”

He portrayed a picture of the economic environment in the UK which made it seem not too bad in comparison with other major world economies. However, GDP is forecast to fall by 3.5% in 2009 and the claimant unemployment rate is now 4 ½% of the UK workforce. The Treasury forecasts are clearly far more bullish than those of many leading economists, as they expect the economy “to start growing again towards the end of this year.” We remain the world’s 6th largest exporter of goods and the 2nd largest exporter of services. Mr Darling reflected on the successes that emanated from technological developments in exploiting UK oil and gas in the past and asserted that he wants the UK to be “a world leader in renewal energy technology.” Indeed, green technology is seen as the key growth sector for the next few years and the UK is committed to cutting carbon emissions by 34% by 2010.

In a Budget that seems sure to be viewed with much suspicion and scepticism by both political adversaries and City institutions alike, further capital investment and sectoral support programmes were announced with “new money” being promised in many areas. The source of this “new money” appears to be some magician’s hat or sleight of hand more commonly known as “borrowing”. Unprecedented levels of government debt (both in absolute terms and as a % of GDP) are forecast with targets outlined far into the future for the reduction of such. The legacy of this Government (whether it is re-elected, or not) will be to saddle future Chancellors with many unpalatable decisions to make – essentially with one hand already tied behind their backs.

Mr Darling’s values of “Fairness and Opportunity” were referred to in seeking to provide further assistance for families and pensioners. Tax evasion and avoidance is to be further attacked to raise £1bn over the next 3 years, whilst “efficiency savings” in the public sector are also being targeted to deliver £5bn per annum.

Headline changes in mainstream taxes were few and far between. Smokers, drinkers and car drivers provided the usual soft targets for duty increases, although those with cars over 10 years old may be encouraged to re-invest via the new scrappage scheme. High earners will suffer with restricted tax relief on pension contributions from 2011 for those earning over £150k p.a. and the earlier introduction (April 2011) of a higher top rate of income tax (now to be 50%) for those earning over £100k (a threshold to be lowered from the expected £150k). Tinkering with capital allowance rates, ISA limits, tax credit awards and the winter fuel allowance will see some element of gain for certain targeted groupings – as with all Budgets we will need to scour the myriad of technical releases to see how non-headline changes may affect our client-base.”

Further details will be available on the Simpkins Edwards web-site shortly.