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Wednesday, 28 November, 2001, 16:52 GMT
Pre-Budget report: BBC's Dharshini David
The BBC's Dharshini David joined us to discuss the chancellor's pre-Budget speech.
To watch coverage of the forum, select the link below:
Chancellor Gordon Brown has unveiled his pre-Budget report to the House of Commons, announcing a significant increase in spending on the NHS in future years.
Saying he was "cautiously optimistic" for the British economy despite uncertain times ahead, the chancellor used his pre-Budget speech to announce an extra £1bn for the health service next year, committing the government to a "world class", publicly-funded healthcare system
What is your reaction to the chancellor's pre-Budget speech? Do you think the government is now on course to deliver on its economic promises?
But, as Kylie was saying, for the rest of us, very little indeed. I think that is really a sign of what's going on at the moment with the Treasury's coffers and also with the economy at large. Basically, Gordon Brown can't afford to give away large sums of money because the economy is looking a little bit shaky at the moment. Also because we know that people would like to see more money invested in the health service, in education and things like that. It is like any of us - the only way we can actually afford to spend more is by counting the pennies and not giving away so much and he has got to be a little bit prudent like that.
Steve, England asks: My wife is a successful sole trader who would like to grow the business but can't pass on the VAT charge to customers. Will the VAT changes help her to grow?
Basically, if your turnover is less than £100,000, it is going to simplify your VAT structure - you pay a flat rate. If you do get into trouble, the Government is not going to automatically stick a penalty onto you, which is what they have done in the past. They fined people and put them into even more debt and made their problems even worse. Instead they will offer you help and advice. So something that small businesses in particular very much need as we all know. The Chancellor's buzz-words at the moment seems to be: innovation, investment and enterprise. So basically he's trying to further all those and hopefully that will simplify things for smaller businesses and it will help you to grow for a sole trader.
If people do need more advice about this, the Treasury or Customs & Excise seem to be the place to go. They'll be fully primed on the new measures and they could give you all the latest rates etc.
What he does is he announces spending plans for the next three years, not just for this year. So there are billions of extra pounds due to be spent on education. In fact in the March Budget he announced even more money to go into education as well. So that should be filtering through in the next three years. A lot of that is to go on, what they call, investment projects - building new schools, improving equipment etc. For those kinds of things, it takes time to actually get round to putting those projects in place - so it's going to be a kind of a slow start, I think. But hopefully, the extra billions of pounds - and they do run into the tens of billions here - should be apparent over the next three years. The question is, what happens after that if he wants to carry on raising spending at that rate?
But something the Chancellor is sometimes criticised for is for announcing measures over and over again until we don't know what is new and what isn't. So I think he was scared that if he came out and said - well actually I am going to spend extra money on education - people would say - so that's on top of what you've already said - which he can't really afford to do right now.
But if you want to know what's going to happen to spending on education, keep your eyes out next July for the spending review. That's when he announces his next three-year spending plan. That's when the extra money should come through for schools, hopefully.
His other plan, as we've been hearing about, is a fairly political one - it is improving the quality of public services. If you look at what has been going on in health and education in particular, spending there has fallen behind in recent years. So their plan, apparently, is to build that up again and over the next couple of years, spending is going to grow in those key areas by over 5% per year - now that's a very fast rate. To put that figure in perspective, in the past 20 years or so, it has only grown at about 3% per year. So their plan is to invest in the public services. But at the same time we can't have everything. So I don't think tax cuts are there in the years to come.
The Chancellor said yesterday, he was very optimistic about how Britain was going to weather the downturn. Is it because of the flexible labour market?
Having said that, there is more to the picture. Some people might say that the Chancellor is being a bit too optimistic about growth next year. I think possibly he is. But if you look at what's going on around the other major economies - unlike the US, unlike Germany - we may well escape recession. But it is more about the fact that we have got the Bank of England here who've cut interest rates seven times - as Gordon Brown was saying yesterday - now that's helped and consumers are still spending. So hopefully if we carry on spending - which is our duty for the economy right now - that's should keep us hopefully out of the red next year.
So, at the moment, I am not aware of any plans to look into the CSA but at the moment there are a lot of things that the Government is consulting on. Perhaps they're thinking - well let's get these out the way and then we will look at it. So maybe that will come up during the next wave but not in the immediate future, no.
So if you want more details on whether or not your area is covered, the best thing to do is get in touch with the Department of the Environment, get in touch with the Land Registry to find out. This measure comes into force on Friday. So even if you're signing a contract now, that's ok, as long as you're completing a purchase after Friday, you could still see that smaller bill at the end of the day.
Whether taxes are going up or whether they are being reduced - this is always something which Gordon Brown is criticised for. What is the balance between the taxes which he has abolished during the Labour Government and those which have been introduced?
So in the next few years, if the economy is not doing quite so well and we're not earning quite so much and companies' profits aren't so great - then the tax taken may well go down. In fact what the Government seems to be saying is yes, ok, we admit it - taxes are higher - I think the sum was some £20 billion higher than it was when they came to power in 1997 - but it's going to go down in the next few years - we think the tax take is actually going to fall a bit. So he is absolutely right, we have been paying more in tax in that sense.
Looking at what he was saying yesterday, he seemed to be saying - we need to invest more in our public services, we need to invest more in our health service. Now we've heard Tony Blair say that he'd like to get spending on health up to the EU average in terms of as a proportion of our national income. We were talking to some experts today at an academic think tank called the Institute of Fiscal Studies. They were telling us that they've got their work cut out, this government, if they want to do that. It's going to mean raising taxes at the end of the day and I think Gordon Brown was trying to pave the way for that yesterday.
So I think in the coming Budget we may see some tax rises. I think the good news is that we're not going to see them in some of those areas that can affect people most - things like petrol taxes, tobacco etc. The experts are saying that those kind of areas may not see big rises. But we could see ourselves hammered in different ways. So don't look for a big give-away Budget seemed to be the message we were getting yesterday from Gordon Brown.
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