The Chancellor of the Exchequer Alistair Darling will deliver his pre-budget speech to the House of Commons on December 9.
With Darling battling to close a predicted GBP175bn budget deficit amid plunging tax revenues, a sputtering economy and an upcoming general election, this year's speech promises to be the most keenly watched and crucial announcements of recent years.
Further revenue-raising measures are expected by many observers – with the Chancellor possibly targetting value-added tax and capital gains tax for rate increases – as are additional cuts in expenditure. But with the election due no later than June 2010, and with the UK economy showing signs of a nascent recovery, Darling walks something of a tightrope, and some are of the view that he may choose to delay the most painful fiscal decisions.
With so much at stake, Chris Sanger, head of tax policy at Ernst and Young, says that now is not the time for "eye-catching measures."
“Many of the stimulus measures announced in the 2009 budget are still working their way through the system but with VAT reverting back to 17.5% (or potentially going higher), the pre-budget report may well be a painful experience. In coming to his budget judgment, the Chancellor should consider the fragility of the UK recovery and contrast the need to repair public finances with the potential threat to the economy," Sanger commented.
“In reaching this judgment, the Chancellor needs to address the challenges of maintaining the UK’s competitive position in terms of foreign direct investment and as a location for company headquarters. It is the time to push forward with ongoing reforms, such as the controlled foreign company regime and the taxation of intellectual property, to end a prolonged period of uncertainty and to help the UK compete," he added.
“In this time of instability, a strong positive message from the Chancellor could act as a clarion call for businesses to focus their recovery here in the UK," Sanger concluded.
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