Budget 2010: What contracting experts expect

A bold Budget, containing both spending cuts and tax rises, is what the UK economy needs, but leading advisors to contractors agree that Alistair Darling will almost certainly not deliver it this week.



Instead, and if Mr Darling is to be believed, Wednesday will not see any major giveaways to the public, and the shape of future spending cuts, or tax rises, will probably be left unclear.



"The chancellor will not want to take steps to lose voters by increasing taxes, even on the usual suspects of alcohol, tobacco and fuel," said Ray McMahon, a tax advisor at consultant365.com.



But on the other hand, Mr Darling also "doesn't have sufficient funds to offer many, if any, sweeteners to the electorate," said McMahon, in the light of the government's promise to halve the UK's deficit within four years.



Martin Hesketh, of Brookson, an accountancy firm for contractors, agreed that figures for the macro economy appear to give Mr Darling little room for manoeuvre.



"The chancellor faces a tough day on 24th March as he delivers a budget upon which Labour will be judged in the next general election, potentially weeks away," he said.



"There's no dispute that more needs to be done if the government continues to pledge it will halve the budget deficit in four years, but with a general election so close, I have my doubts as to whether Mr Darling will deliver [any] further blows".



Former Revenue inspector Kate Cottrell, of Bauer & Cottrell, has a similar outlook : "I expect the budget will be pure electioneering and doubt if the government will be bold at this stage.



"If they are bold, then they will attack the better off so look out for hikes in National Insurance rates, on top of the new 50% income tax band."



However the political climate may be too fraught for the chancellor to even raise what the state regards as an 'indirect tax' (National Insurance).



McMahon, also an ex-tax inspector, said: "It is probably unlikely that any further changes will be made to the tax and NIC rates in view of the increases already announced."



Meanwhile Broookson warned that any move on Wednesday to increase income tax on salary brackets under £150,000 would be "highly detrimental" to the government's bid to grow the skilled workforce.



"The UK is the sixth biggest manufacturer in the world and requires skilled engineers to maintain and exceed this position, which [is] largely [due to a] number are professional contractors," Hesketh said.



"If the government continues to purposefully target workers in this position, it could reflect that it does not understand the value this community has to offer. "



Previous clampdowns, announced in Budget or pre-Budget statements, on such non-permanent workers have centred on their expenses, employment status and tax practices.



So while they are unlikely to feature in the Budget speech, "the usual issues [will] continue to bubble away - 'income splitting', expenses at umbrellas and self-employment in the construction industry," Cottrell anticipated.



However, she said the government have already promised no changes until the construction industry improves, while outlawing 'income splitting' would "cause an outcry in these difficult times."



She cautioned that without a safer target "the chancellor may just attack the umbrella companies and their users [now that] MPs' expenses have been sorted."



Yet alongside the economic pressures, and the onus on Mr Darling to convey a plan to relieve them, any fresh assault on expenses may be too much of a political risk unless it is in the shape of a consultation document.



Moreover, the expenses of umbrella company workers may represent too small a cash cow in the chancellor's field of possibilities, despite the Treasury's obvious need for revenue.



"So far as attempts to actually raise money are concerned, we should expect these to be focused around things that will be relatively easily enforceable", reflected Roger Sinclair, a legal consultant at Egos.



"[But ultimately] we will get a Budget aimed more at catching votes than at resolving the problems with the economy."



McMahon seemed to agree: "The chancellor has very little room for manoeuvre this year and the [major economic] problems... may mean it's a case of waiting until next year when the next government (whoever it is) will be expected to sort them out, with greater increases in both direct and indirect costs [for the public]."



Cottrell also thinks some bold moves from Number 11 Downing Street are incoming, though only after the 2010 election has taken place.



"I expect a relatively quiet day on Wednesday, but if the Conservatives get in at the general election, it will be their emergency budget that will be the one to watch."