Article Opportunity - Following the Pre Budget Report...

, Following today’s pre-budget report, please see the below comments from Paul Windsor, partner at specialist business advisory and accountancy firm, WSM. Please let me know if you would like any further comments from Paul. I look forward to hearing from you soon. Learning the lessons of History A brief commentary on the Chancellors pre-budget report We learn from history that we learn nothing from history. The relevance of George Bernard Shaw’s words could not have been more acute in the House of Commons today as the political rhetoric tumbled from government and opposition benches and the class war of the past reared it’s unpleasant head. Surely the clear lessons from history tell us that taxing the prosperous, hard working, high earning minority simply does not work. It stifles innovation and ambition, drives expectations down to the lowest common denominator, leads to an exodus of the best people and then it takes decades to rebuild the trust between citizen and state that is required for the long term commitment and growth that the chancellor claims is so badly needed. But whilst there is a natural tendency to want to write off the Chancellor’s efforts on the grounds that it was a politically motivated pre-budget report, littered with attempts to win votes for his party next year, there remains something very worrying about the oppositions stance to make significant spending cuts that will lead to a potentially devastating economic crisis for millions of public sector employees, as well as those directly connected with the provision of services to the sector. Such clear lines between political parties may at least begin to motivate discussion and improve the voter’s participation in the process of governance. As a simple tax advisor I have always been struck by the simplicity of the proposition. If we choose to continue spending we must pay for that decision. If we do not wish to pay for it we must cut our spending cloth accordingly. Payment to keep the public services as they are - the Chancellors proposed increase of £31bn in public spending next year - can only be funded with a rise in the basic rate of income tax and there should be no fear in reverting to the levels seen in recent history of 25%. This would certainly be a step leading to a fairer society with all taxpayers contributing to the wellbeing of all citizens. This is not a vote winning step to take but to any normal thinking person it is clearly the only means by which the Chancellor’s spending can be maintained. Mr Darling did try to fiddle around the edges of this with his 0.5% rise in National Insurance contribution which equates to a rise of 4.5% in the cost of NI for an employee (from 11% to 11.5%) and a further significant disincentive for employers who will now be liable to pay a 13.3% payroll tax for the privilege of employing someone. In addition to a rise in the basic rate of tax there are plenty of other low hanging fruits which could be picked to bolster the empty coffers. A reversion of Capital Gains tax to the tax payers marginal rate of income tax would seem simple and politically effective and the exclusion of non-residents from the CGT net should be reformed – yielding strong revenues from overseas individuals and corporate entities that don’t even get a vote! The alternative proposal implied by Mr Osborne of significant expenditure cuts is natural conservative territory but flies in the face of the new look social conservatism of the current leadership. The fires of the Thatcher era still burn strongly in the memories of a majority of the population and cuts will still be seen in this context. The economic truth is that the harsh cuts did pave the way for enormous growth and prosperity for subsequent decades, turning the ‘poor man of Europe’ into the envy of its EC partners and a model that was replicated around the globe. So it seems that the spending proposals have not been tempered with sufficiently bold tax changes that are needed to sustain them – leading no doubt to a further weakening of our economic position in the global community. Our only hope is that the Tory approach won’t traumatise the electorate for more than 5 years! Paul Windsor, WSM Partners LLP Contacts: Paul Windsor, WSM Property 020 8545 7606 paul.windsor@wsm.co.uk www.wsmproperty.com Tim Maltin, Maltin PR 020 7887 1357 tim@maltinpr.com www.maltinpr.com Picture of Paul is available at www.maltinpr.com/paul-windsor Notes to Editors: Paul is a regular commentator on property and finance trends, including taxation. Paul J Windsor BSc FCA - Background Information Paul is 51, married with 3 children and lives in Haslemere, Surrey. Paul has been a partner at WSM Partners LLP since 1985. WSM is a firm based in London, SW19 with a team of 30 professionals. The firm has two divisions,one specialising in the tax for individuals and small businesses and WSM Property specialising in UK real estate tax. Having started his professional career with KPMG Paul now believes passionately that clients of all sizes are best served by smaller specialist firms and to prove the point the firm currently works for international clients such as Citigroup, UBS and Deutsche Bank. The firm is at the leading edge of UK property tax work and deals with complex limited partnership vehicles, SDLT restructuring cases and offshore property unit trust structures. In 2006 the firm was a finalist in the Accountancy Age small firm of the year award and has also been accredited with the Investor in People award for many years. Paul is also Chairman of Polka Children's Theatre Limited, a leading national theatre company dedicated to bringing the performing arts to children and young people. Polka's productions are always highly acclaimed and set a gold standard for children's theatre around the world.