Four pence on a pint of beer. Eleven pence on a packet of 20 cigarettes. A budget lacking genuine surprises prompted some reassuringly old-fashioned headlines in the following days’ papers. My earliest Budget memories date back to the 1950s when my parents’ Daily Express always splashed on the Chancellor’s attacks on the simple pleasures of the working man and woman.
But economic management has moved on since then and taxes on fags and booze have become minor elements in a much more complex financial package. The Budget itself has become a much less dramatic occasion with equal attention focused on the earlier Autumn Statement, which outlines spending plans.
The greater – and welcome – use of long-term planning means many of the measures included in a particular Budget will have been announced or trailed in the previous Autumn Statement or even in earlier years. The days when a Chancellor could be obliged to resign for leaking Budget secrets – as Hugh Dalton did in 1947 – appear long gone.
Unexciting though it was, Alistair Darling’s first Budget did involve some tinkering at the edges. The reduction in the basic rate of income tax from 22 to 20 per cent from April 6 will have a knock-on effect on personal pension contributions. A lowering of tax rates reduces the impact of tax relief so that basic tax rate payers will have to contribute £80 to generate £100 of value in their pension compared with £78 before.
In a further tidying up of the pensions regime, pensioners with only small amounts saved through occupational schemes will be able to take their pension as a lump sum rather than in monthly instalments Before taking this step, though, they need to consider whether even a small monthly sum, which will be paid until death, represents better long-term value.
For the growing number of people who face being caught in the net of inheritance tax, there was welcome confirmation that IHT allowances can be transferred to spouses or civil partners. This move, announced in the Autumn statement, allows up to £600,000 of a couple’s estate to escape IHT. There was no change to the 40 per cent rate at which IHT is charged though indexation will see the individual ‘s nil-rate band rise from £300,000 to £312,000 in April with the couple’s figure rising in line.
At the other end of the age spectrum, opening a Child Trust Fund account will be made marginally easier from April 2009. This results from the removal of the requirement that parents physically send in their CTF voucher to a savings scheme provider. The stresses and strains of dealing with a new baby have meant that many parents manage to lose or mislay their vouchers. This leads to a delay in their savings starting to earn interest.
The annual £1,200 allowance that can be invested by parents for each child has remained unchanged since CTFs were introduced in 2005 but, given the small size of the government contribution, the parental contribution remains vital to building up value in the scheme. When the little blighters are 18 then they can worry about how much the Chancellor is skimming off their drinks and cigarettes.
By Charles Batchelor