The pre-budget airwaves are quiet... too quiet

Is that because no news is good news?

The pre-budget airwaves, normally teaming with feverish speculation, are ominously quiet. There doesn't even appear to be a 'book' on how long the Chancellor will speak for (or not that I have come across yet at least).

Unless George can produce the ubiquitous (most likely scrawny and headlight-dazzled) rabbit out of his (or anyone else's) hat, we think the Budget will aim principally for stability, with few big changes and a broadly pro-business stance to keep encouraging growth. In terms of predictions as they might affect those in the private wealth industry, we can predict what he won't do (and a little of what he might), with some confidence:

Inheritance tax won't be abolished and the Nil Rate Band won't be increased (OK - we already know that). Tinkering might involve a resurrection of the well-rehearsed fear that the Chancellor might abolish the provision whereby you can vary a will or intestacy within two years of death (usually to take advantage of an exemption from inheritance tax for gifts to charity, spouse or relief for business or agricultural assets), or even perhaps the seven-year rule for gifts, but we think this is unlikely. Given that it raises little in terms of revenue we don't think the rate will be changed either.

Capital gains tax: The extension to non-UK individuals could have been made when liability was extended to non-UK corporates in relation to real property. Although some see this in itself as an anomaly, the rates have been tinkered with over recent years without much evidence in terms of overall increase in the UK 'tax take'.

Income tax: A further reduction from the incoming 45% is unlikely, as are any major changes to other rates or (we hope) further meddling with pensions. The personal allowance could rise to £10,000 or even more, to ensure that those on the minimum wage (around £11,200 p.a.) do not pay tax.

Mansion tax: Although it has been much discussed, this seems unlikely, as it has never had Coalition Government support. The mooted tax would be primarily a tax on London and the South East, and many of those affected, especially at the introductory level of £2 million, may well be unable to pay the tax (particularly those who inherited their properties, are already mortgaged to the hilt, and/or have lived in the same house for many years).

Tax avoidance: Given the introduction of the General Anti-Avoidance Rule, which is extremely wide in its application, we struggle to see what else can be bolted on to HMRC and HM Government's ever increasing arsenal.

So that leaves us with very little in terms of predicting what he might come up with. My own wish list would include:

- a flat rate of tax (including both income and capital gains);

- the abolition of inheritance tax; and

- a four wheel drive car tax - a much better indicator of surplus wealth, better for the environment, easier to collect than a mansion tax and a positive benefit for those who have to contend with them in urban settings.

Sophie Mazzier is counsel at private client law firm Maurice Turnor Gardner LLP

This article first appeared at Spears magazine.

Photograph: Getty Images
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Why Angela Merkel's comments about the UK and US shouldn't be given too much weight

The Chancellor's comments are aimed at a domestic and European audience, and she won't be abandoning Anglo-German relationships just yet.

Angela Merkel’s latest remarks do not seem well-judged but should not be given undue significance. Speaking as part of a rally in Munich for her sister party, the CSU, the German Chancellor claimed “we Europeans must really take our own fate into our hands”.

The comments should be read in the context of September's German elections and Merkel’s determination to restrain the fortune of her main political rival, Martin Schulz – obviously a strong Europhile and a committed Trump critic. Sigmar Gabriel - previously seen as a candidate to lead the left-wing SPD - has for some time been pressing for Germany and Europe to have “enough self-confidence” to stand up to Trump. He called for a “self-confident position, not just on behalf of us Germans but all Europeans”. Merkel is in part responding to this pressure.

Her words were well received by her audience. The beer hall crowd erupted into sustained applause. But taking an implicit pop at Donald Trump is hardly likely to be a divisive tactic at such a gathering. Criticising the UK post-Brexit and the US under Trump is the sort of virtue signalling guaranteed to ensure a good clap.

It’s not clear that the comments represent that much of a new departure, as she herself has since claimed. She said something similar earlier this year. In January, after the publication of Donald Trump’s interview with The Times and Bild, she said that “we Europeans have our fate in our own hands”.

At one level what Merkel said is something of a truism: in two year’s time Britain will no longer be directly deciding the fate of the EU. In future no British Prime Minister will attend the European Council, and British MEPs will leave the Parliament at the next round of European elections in 2019. Yet Merkel’s words “we Europeans”, conflate Europe and the EU, something she has previously rejected. Back in July last year, at a joint press conference with Theresa May, she said: “the UK after all remains part of Europe, if not of the Union”.

At the same press conference, Merkel also confirmed that the EU and the UK would need to continue to work together. At that time she even used the first person plural to include Britain, saying “we have certain missions also to fulfil with the rest of the world” – there the ‘we’ meant Britain and the EU, now the 'we' excludes Britain.

Her comments surely also mark a frustration born of difficulties at the G7 summit over climate change, but Britain and Germany agreed at the meeting in Sicily on the Paris Accord. More broadly, the next few months will be crucial for determining the future relationship between Britain and the EU. There will be many difficult negotiations ahead.

Merkel is widely expected to remain the German Chancellor after this autumn’s election. As the single most powerful individual in the EU27, she is the most crucial person in determining future relations between the UK and the EU. Indeed, to some extent, it was her intransigence during Cameron’s ‘renegotiation’ which precipitated Brexit itself. She also needs to watch with care growing irritation across the EU at the (perceived) extent of German influence and control over the institutions and direction of the European project. Recent reports in the Frankfurter Allgemeine Zeitung which suggested a Merkel plan for Jens Weidmann of the Bundesbank to succeed Mario Draghi at the ECB have not gone down well across southern Europe. For those critics, the hands controlling the fate of Europe are Merkel’s.

Brexit remains a crucial challenge for the EU. How the issue is handled will shape the future of the Union. Many across Europe’s capitals are worried that Brussels risks driving Britain further away than Brexit will require; they are worried lest the Channel becomes metaphorically wider and Britain turns its back on the continent. On the UK side, Theresa May has accepted the EU, and particularly Merkel’s, insistence, that there can be no cherry picking, and therefore she has committed to leaving the single market as well as the EU. May has offered a “deep and special” partnership and a comprehensive free trading arrangement. Merkel should welcome Britain’s clarity. She must work with new French President Emmanuel Macron and others to lead the EU towards a new relationship with Britain – a close partnership which protects free trade, security and the other forms of cooperation which benefit all Europeans.

Henry Newman is the director of Open Europe. He tweets @henrynewman.

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