Pre-Budget report

ePolitix.com Stakeholders comment on Alistair Darling's first pre-Budget report as chancellor.

Stakeholder response: Association of Teachers and Lecturers (ATL)

To send a comment to ATL, click here

The education measures announced in the pre-Budget report are a mixed blessing, says the ATL. 

ATL acting deputy general secretary, Martin Johnson, said: "We are very pleased nearly £1bn is being allocated to fund the refurbishing and rebuilding of primary schools. 

"This will help make all schools and classrooms fit for use, and finally put an end to children having classes in leaking and rotting huts.

"It is good the government has recognised the impact of social class on children’s achievement. 

"Breaking the link between class and achievement is the biggest challenge facing schools today. 

"We hope to work with the government to agree measures to help lift the achievement of all children – particularly those from deprived backgrounds.

"However, children from poorer families are particularly badly-served by the current national curriculum and constant testing.  They are far more likely to leave school at 16 feeling failures, without five passes at GCSE, and lacking the skills they need for outside life and work.

"We are also unhappy about adding more targets for schools to meet – they will not solve our education problems. 

"We already have the most tested children in Europe, and one of the biggest ranges of pupil achievement.”

Stakeholder response: The Council of Mortgage Lenders (CML)

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CML director general Michael Coogan said: "With the estates of married couples now exempt up to £600,000, rising to £700,000 by 2010, the effect is broadly the same as if the chancellor had fully indexed the inheritance tax threshold for the effect of house price movements since Labour came to power, which would have resulted in an exemption threshold of £608,600. 

"This is welcome news.

"On fixed-rate mortgage funding, we look forward to seeing the proposals that the chancellor said he will bring forward in the budget. 

"There is a key trade-off for borrowers in choosing a longer-term fix, relating to the potential costs of exiting the deal early, and this is the key feature that needs to be addressed to stimulate mainstream consumer appetite.

"While a modest measure, we also welcome the increased spending on flood defences now committed by the government, and the desire to build more homes. 

"But it is crucial that these measures go hand-in-hand to achieve sensible results and minimise the number of homes at risk of flooding."

Stakeholder response: Age Concern

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Age Concern’s director-general, Gordon Lishman, said: "Fundamental reform and significant further investment over the next decade is clearly required but this is a vital first step in the right direction.

“Changes to inheritance tax will be welcomed by those who have considerable assets to pass on to their heirs but will not affect the majority of older people.

"The average level of assets for the over-60s is well below the current threshold of £300,000, with around a third of older people not even in the position to own their own home.

"It’s good news that the pension credit will continue to rise in line with earnings and really promising that the government has announced a Public Service Agreement target around tackling poverty.

"But it is extremely disappointing that the government has yet again failed to bring forward the date for re-linking the state pension to earnings.

"Without quick intervention, the real value of the basic state pension will continue to fall and today’s pensioners will fail to benefit from any of the good measures proposed in the Pensions Bill.

"Many pensioners will be very disappointed that there was no announcement on additional help with their council tax bills.

"The reassurance that local authorities will keep council tax rises to below 5 per cent next year will be of little comfort to pensioners struggling to live on stingy state pension linked to inflation.

"The government should replace council tax with a fairer system linked to people’s ability to pay, and for it to deliver a higher basic state pension so pensioners can afford to pay their bills.

"The modest increase in the financial inclusion fund is welcome but the challenge now is to ensure that financial inclusion initiatives reach all those affected, including older people.

"The absence of any announcement to help with the cost of energy bills will be a huge disappointment to many older people, who are more likely than any other age group to be affected by fuel poverty.

"Pensioners, particularly those living on a low, fixed income, often bear the brunt of high energy costs.

"In the short term, the government should increase the winter fuel payment by at least £100 to help older people pay their bills.

"But it must also ensure that decent housing, energy efficiency measures and a higher basic state pension are in place to help older people stay warm."

Stakeholder Response: Investment Management Association (IMA)

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The IMA respond in depth to some of the key issues in the report

Trading versus Investing

IMA welcomes HMRC's interim statement clarifying that the use of derivatives can be treated as investing rather than trading.  This issue has become more important recently with the increasing use of derivatives in authorised funds. 

The extension of this clarity to pension funds and charitable funds is also welcome.  IMA continues to call for a definitive statement that authorised funds will always be treated as investing, in the interests of tax certainty for investors.       

Julie Patterson, Director of Authorised Funds and Taxation said:

"This clarification on the use of derivatives is a welcome and helpful statement against a background of increasing numbers of funds choosing to domicile offshore where tax certainty is ensured. 

We continue to believe, however, that in the longer term all funds should be treated as investing and not trading and we hope to work with HMRC to this end."

Stamp Duty Reserve Tax (SDRT) - Schedule 19 FA1999

HMRC has announced a consultation on simplification of this regime.

Julie Patterson, Director of Authorised Funds and Taxation said:

"IMA welcomes the consultation on simplification of the regime. But we believe that abolition is the best option, as this funds-specific tax puts UK funds at a competitive disadvantage, drives funds offshore and results in consequential loss of tax for HMRC.

IMA has commissioned research to support the case for outright abolition which we believe will not result in any tax loss."
 
Offshore Funds Regime (OSFR): a new framework

HM Treasury has today issued a Discussion Paper on reform of the Offshore Funds Regime (OSFR). 

The paper addresses problems with the current regime whereby an offshore fund of funds cannot hold more than 5% of its investment in non-distributing funds, income has to be calculated according to UK standards and distributor status for funds is granted retrospectively leading to tax uncertainty for investors. 

The proposals allow offshore funds to invest any amount in non-distributing funds and make provision for sub-funds to provide information about the separation of income and capital. 

Where this is not possible, the underlying fund's value is treated as income for tax purposes. The proposals will also provide certainty for investors about the tax status of the main offshore fund, which is welcome.

Julie Patterson, Director of Authorised Funds and Taxation said:

"IMA welcomes these proposals which are a response to industry concerns about the relative attractiveness of such funds for UK investors. 

The proposals represent a significant improvement. The regime provides certainty to investors that the fund in which they are invested is a distributing fund, thus allowing income and capital growth in the fund to be taxed accordingly."

Stakeholder response: Woodland Trust

To send a comment to The Woodland Trust clickhere

James Cooper of the Woodland Trust commented: "We welcome the creation of a new Public Service Agreement for a 'healthy natural environment for today and the future', as part of the Comprehensive Spending Review and Pre-Budget Report. 

"However the Trust was generally underwhelmed by the government’s failure to match its rhetoric on the environment with a willingness to act and to commit resources.

"A 1.4% increase in real terms for Defra looks pretty meagre on the face of it given the scale of the challenges set out and the increased rhetorical emphasis on environment and countryside by government.

"It also looks particularly small compared to the 'significant investment in roads' promised in the Department of Transport's settlement and when one takes into account the need to address flood defences as part of the Defra settlement.

"Certainly the introduction of a Public Service Agreement for a healthy natural environment is promising, although we need to see cross-government action now to back up the words. Biodiversity needs to be at the heart of delivery on this action because it is the life support system upon which we depend.

"The government can move forward on this through an enhanced emphasis on biodiversity adaptation in the Climate Change Bill.

"The Trust also welcomes a switch to the concept of taxing flights rather than individual passengers, and government willingness to look in the budget at encouraging purchase of cleaner cars though the latter was simply a commitment to look at the issue.

"These ideas although not new are welcome as it is good to see the government moving forward. However the Pre-Budget report showed a lack of impetus when it comes to climate change which does not square with the rhetorical importance the government has attached to acting on the Stern Report.

"The continued commitment to expand Britain’s airports with the environmental damage this will bring also undermines the credibility of the commitment to tax flights."