The two announcements in the Pre-Budget Report that got the most headlines were the two that actually represented the least amount of change. Take the business of making non-doms pay a £30,000 annual levy to maintain their status after seven years. No one has any idea how many people will end up paying this, but I can’t think it will be very many. Most non-doms only stay a few years, so there is no reason for them to be too bothered at all by anything that happens after seven years.
Then there is the raising of the inheritance threshold for couples to £600,000. Given that each part of a couple had their own £300,000 allowance anyway, this is really neither here nor there. It’s nice that it cuts the administration burden for those who like to minimise their tax bills – no more nil-band trusts and no more deeds of variation for those with assets under £600,000 – but it absolutely does not represent (as so many newspaper headline writers seem to think) a doubling of the inheritance tax threshold.
The only interesting effect I can think of that the move might have is one that will be profoundly irritating for the many 50-somethings knocking around the southeast waiting for an inheritance to help pay off their massive mortgages. Now there is no tax incentive for couples with less than £600,000 to use their nil-rate bands up separately, they probably won’t. So instead of handing a pile of money over to the children on their husband’s death, expect the nation’s widows to hang on to all the family assets until they die. I suppose this could be part of Gordon’s plan. Perhaps he hopes it will encourage them to spend more and in some small way compensate for the fact that, with mortgage rates rising and house prices swooning, their children can no longer afford to humour him by doing the same.
He’d better have all his fingers crossed, because there really isn’t much else out there to buttress the economy. Alistair Darling’s new forecast of GDP growth of 2%-2.25% this year is as hopelessly optimistic as his last one (2.5%-3%), given the state of the nation. As a percentage of income, mortgage interest payments are now at their highest levels since 1992. Highly-paid jobs are disappearing all over the place – from the fixed-income desks of the big banks to the BBC. Public spending growth is – by necessity, not choice – slowing and public-sector debt has risen from just over 31% of GDP in 2000 to 36.7% – and that’s despite huge rises in tax revenues. Whatever he might have claimed over the years, there was never any prudence in Gordon Brown’s budgets. There wasn’t any in Alistair Darling’s effort either.