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Expert view: what will the budget bring?

By Channel 4 News

Updated on 21 June 2010

Ahead of today's budget, John Whiting, tax policy director of the Chartered Institute of Taxation, previews the likely ups and downs in George Osborne's red box for Channel 4 News.

Budget box

For many budget-watchers, Tuesday’s speech will feel strange – a Conservative chancellor speaking for the first time since 1996, and on behalf of a coalition government.

If spending cuts will be a feature, what of the tax changes in George Osborne’s speech? Come to that, will he use the traditional budget box?

The known unknowns
We know the outline of some of the looming measures from the coalition agreement. However, what was said on tax in the agreement was a little enigmatic, so we will have to listen carefully to pick up more of the detail – including, especially, when changes will take effect. So listen out for:

Budget: getting the bad news out of the way
George Osborne has just returned from his audience with the Queen, a traditional eve of budget catch-up. Did Her Majesty drop her tea-cup? We may never know, writes political editor Gary Gibbon

The IFS has been predicting the government will announce it wants to eliminate all the structural deficit in one parliament and that has now become the expectation.

That would be an £85bn repair job on the economy which the last IFS figures, post OBR report, said could mean cuts in unprotected departmental spending of one third.

The government will be emphasising "fairness" until it is blue (and coalition yellow) in the face and has run its figures through all sorts of programmes to prove that this is progressive repair work and that everyone has a share in the suffering.

Somewhere in the clatter of crashing public sector projects and payments they hope you'll hear a growth strategy and pick up a direction of travel on taxation.

The government wants this to be a budget that gets a huge chunk of the bad news out of the way. They don't want to keep revisiting this. Though of course if growth doesn't pan out, Europe slumps back...well, those of us who are not the reigning monarch get a jumbo dose of economic cod liver oil at 12.30.

Sleep well.

There has also been mention of changing corporation tax to a more "territorial" basis, further action on non-domiciled taxation, changes to air passenger duty to a "per plane" basis and a review of the controversial "IR35" rules, though these are likely to be reviews rather than immediate changes.

A couple of loose ends from the March budget – the 50p "broadband levy" and the taxation of furnished holiday lettings – should get mentions.

More budget analysis from Channel 4 News
- Gary Gibbon: billions of reasons for raising VAT on budget day
- 'Council tax freeze' softener for budget cuts
- Cuts could test Lib Dem unity
- FactCheck: gold-plated public sector pensions?
- Your guide to jargon busting: debt, deficit and structural borrowing
- How do you save £100bn? Take the Chop or Not quiz
- Budget: the challenge for George Osborne

The unknown unknowns

Chop or Not?
With the UK deficit running at £156bn, there are tough choices to be made on what to cut and what to tax.

We'll get the Chancellor's decision on Tuesday but here's your change to decide what to Chop or Not.

And Krishnan Guru-Murthy will present Dispatches on Monday at 8pm on Channel 4 with a team of experts who believe their proposals could get Britain's budget back in shape.

But all this has avoided mentioning (just like the coalition agreement) the elephant in the room...VAT. Will the rate go up? It’s hard to see how the UK can get its books into balance without an increase, so a rise to 20 per cent must be on the cards, probably from 1 January.

That seems more likely than adjusting what is subject to VAT – none of the zero-rated items would be easy to move into the tax net (New houses? Books and newspapers?? Children’s clothes??? Food????) though one could just about see some small tweaks to move a few minor things into the little-used 5 per cent rate.

Budget: The Challenge for George Osborne
"It is said that the Tories hid George Osborne away during the election campaign because they feared he would frighten the children. He plans to get his own back by frightening the grown ups", writes broadcaster Peter McHugh.

Read Peter McHugh's article

Where’s the good news?
This is going to be a tough budget, with spending cuts featuring heavily. There may be some additions to tax credits for the lower paid to help compensate for any VAT increase.

But good news is likely to be limited to that personal allowance increase, which at least will help cushion lower and average earners.

And many people will be watching out for better news the following day, hoping that a good England result will take minds off the budget pain...though England's football team doesn’t always deliver pain relief.

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