***News flash*** CAPITAL GAINS at 12th May 2010

What a shambles we’ve been through in Westminster.  I tried mixing yellow and blue on my son's colour paint palate last night - it came out Brown - almost......

I deliberately avoided any blogs in the election run up as I want to criticise Government and tax policy, not become aligned to any one party.  My big fear for tax is that taxes will be raised in preference to cuts – and that decision is the “soft option” as it will not encourage people and businesses to operate in the UK.  Combined with more bank regulation I wonder if we’ll have any finance left in five years time…..who knows!....  I wonder what degree of influence Cable will have over Osborne.  I’ve always felt that Cable sounds great but talks rubbish – he presses the buttons with the public with sensible comments but if you string the comments together you get vague conflicting messages and no coherent view of the world.  I digress, I don’t find Osborne an easy man to like on the basis of his media appearances either.

Maybe being liked by me isn’t a prerequisite for getting a job in the Treasury!  Maybe Darling wasn't a bad sort of a fellow - I like to kid myself he wanted to slow the debt down but Brown said "keep printing the cash"!  I never thought I'd be in anything other than celebratory mood when Brown left office, but I was slightly sympathetic to his family - a quiet life in Scotland beckons, with GB himself able to focus on micro-managing his family.  Or maybe his famed bad temper will fade as a more relaxed life lies ahead.  Let's be positive, his wife set a great example on how to be the "first lady" and has repaired some of the damage done by her predecessor.

However, we now have a new Government.  I was starting to think we’d not bother and maybe we should just have left the country to run itself.

First up….I hear media rumours that the Lib-Tory deal means that capital gains (18%) will rise – in the forthcoming Budget (date to follow!).  I wouldn’t be surprised – it’s been tipped to rise for a while.

So if you want to sell, sell now.  Hopefully they will retain the 10% rate for business assets under Entrepeneur’s Relief – but who knows!?......  Some people with big gains might want to act now to trigger a gain to “bag the rate”!.....take advice.

To be fair, I think taxes have to rise a bit and there’s never a real appetite for cuts by elected politicians.  But surely efficiency savings only go so far.  £6 billion is hardly a real dent in our finances – we borrow £163 Billion more each year…what’s £6 billion….?...peanuts!

I drafted a speech for Mr Osborne and Mr Cable – something tells me they won’t use it!......

DRAFT SPEECH FOR OSBORNE/CABLE/DARLING POST ELECTION

In the current climate we are borrowing nearly 13% of GDP, the highest in the western World.  If we do nothing, the external forces of the Bond markets will likely force us to make enormous cuts in due course.  There is no basis for allowing our total national debt to reach ever higher.  The recession is over but there is no guarantee in this world that recovery will be strong or lasting.   As such, I have taken the decision we must move to balance our books in the short term.  This will be painful.  There is no basis upon which we can pretend that ever higher taxes on the top one or two percent of the working population will yield larger taxes - certainly not enough to cover the gap in our finances.  People and business profits are mobile in a global market.  We must create a business environment that is not just competitive but better than America and Asia.  The City of London has served us well as a nation and will continue to do so if we offer stable low taxes, regulation that is both sensible and workable and a living environment and personal tax system that is first rate. 

Since 1997, the Labour party created 1 million new publicly funded jobs.  These are crippling our country.  Tax credits have made subsidy junkies out of the honest working man and the scheme leaks £2Bn per annum in over payments.  It doesn’t work – no scheme with that leakage is viable.

All of us must share the pain as we move from a big Government and big State system to being a leaner and more competitive and business focused economy.  We must stop spending our children’s money now if we are to survive as a viable economic force in the World.  To this end, I will be implementing the following financial changes –

VAT at 25% for two years, reducing to 20% thereafter

Capital Gains Tax at 30% and a 15% rate for business disposals after 4 years

Basic Rate Income Tax and National Insurance to be amalgamated at 32%  Higher rate 45% (40% and 50% withdrawn)

Employer’s NI to be set at 10%

Personal Allowance £10k

Family Tax Credits system to be entirely abolished – the new tax allowance will compensate (10K)

Corporation Tax 20% for all companies

A pay cut for all public sector workers earning over £20,000 of 3% and no rises for 2 more years.  Those public sector employees earning over £150,000 to be subject to individual pay review.

Gradual withdrawal of final salary pensions for the public sector, new retirement age 67 - all in line with all major UK private employers.

The scrapping of all new PFI projects to be replaced with “what we can afford” projects only

The cancellation of the Olympics forthwith

Substantive pay rise for all front line soldiers, improved care for injured and bereaved families.

Whilst these measures will be deeply unpopular amongst many people, we simply can’t kid ourselves we can afford everything we would like to have. 

Gordon Brown masked the problem by borrowing £163Billion in one year alone-  more than the borrowings during the entire period from 1997 to 2007.  He has taken us to the edge, left us in a financial wilderness and should be held to account for gross neglect of the public finances in due course.  I am launching a public enquiry into our national debt scandal in order that those responsbible can be held to account.  Our borrowing is the result of proflifacy and spendthrift Government, not just a global recession.  We need to learn to stick to our golden rules.

Together we can fight through this, avoid the humiliation heaped upon Greece and threatening other Euro zone countries.  But only if we act now.  These are my policies and I commend them to the House.....

Any chance?

I’ll get back to blogging soon  - but in the meantime, I remind you the above is my view, not that of the firm.

Donald Parbrook

Director, Head of Tax