This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more here.
X
MM-Cover-Small-210814.jpg
Categories:Politics

Budget 2011: Chancellor to admit higher borrowing due to "wrong type of inflation"

  • Print
  • Comments (1)

The Chancellor will be forced to admit in tomorrow’s Budget that medium-term borrowing will be significantly higher than planned.

The Financial Times reports that Budget forecasts to be released tomorrow will say “the wrong type of inflation” will squeeze Government finances and hit household incomes.

The pressure on household incomes will mean income tax and National Insurance contributions will not rise as is usual in an inflationary environment while benefits and index-linked Government debt are automatically linked to inflation.

Inflation will be higher than predicted by the Office of Budget Responsibility in November and as a result borrowing will be significantly higher than expected from 2012 onwards.

The OBR will also announce tomorrow it is downgrading the GDP growth rate for 2011 from 2.1 per cent to 1.8 per cent as a result of 0.6 per cent contraction in growth in the last quarter of 2010.

However these downgrades are expected to be reversed in future years because the OBR will not say the long-term potential for the economy has been compromised.

In tomorrow’s Budget the Chancellor is expected to look to raise additional revenues from Non-dom taxes, introduce a new tax on private jets, launch a £100m pot-hole fund and introduce further tax anti-avoidance measures.

Osborne may also announce plans to consult on the Office of Tax Simplification’s recommendation to merge National Insurance and income tax.The move was called for in a recent OTS report which suggested it should be a “long-term” objective.

At a recent event, Osborne hinted that the Treasury may look to make changes to the EIS and VCTs in the Budget. Experts predict the Chancellor may clamp-down on limited-life VCTs.

  • Print
  • Comments (1)

Daily Email Updates
If you enjoyed this article, sign up to receive the latest news and analysis from Money Marketing.

The Money Marketing CPD Centre
Build your annual CPD - you can log and plan your CPD hours for free with The Money Marketing CPD Centre.

Taxbriefs Advantage
Advantage is a digital reference source giving unbiased, independent, answers to your technical queries. Subscribe to Taxbriefs Advantage.

Readers' comments (1)

  • Wrong kind of snow and wrong kind of leaves on the line come to mind.

    Unsuitable or offensive? Report this comment

Have your sayEdit my profile/screen name

You must sign in to make a comment

Fund Data

Editor's Pick



Poll

Should the FCA relax pension transfer qualification requirements?

Job of the week

Latest jobs

View all jobs

Most recent comments

View more comments