New Star: Chancellor's tax cuts not what they seem

www.moneynews.co.uk > General finance > New Star: Chancellor's tax cuts not what they seem

New Star: Chancellor's tax cuts not what they seem

Fri 28th Nov 2008

A leading asset management company has criticised Chancellor Alistair Darling's pre-budget tax cuts for not being as helpful as they may first appear.

According to New Star's chief economist and strategist Simon Ward, the Chancellor's proposed fiscal stimulus for 2009-10 is not drastic enough to provoke the desired upturn in consumer spending.

As an example of this, Mr Ward comments: "A temporary VAT cut is not targeted at people more likely to spend any windfall gain and has no positive impact on the economy's long-term supply potential.

"Consumption will rise in the months before the lower rate is withdrawn but fall by roughly same extent afterwards."

He adds that the majority of consumers base their spending on their long-term income prospects, rendering temporary tax cuts irrelevant.

Further measures announced in the pre budget report included the introduction of a 45 per cent income tax rate for those earning over £150,000 per annum, and a rise in National Insurance of 0.5 per cent from April 2011.

Click here for more general finance news

Related News : General finance
	Citizens Advice welfare applauds government
	Confused.com energy defends British Gas
	Bank of Ireland passes stress test
	Tesco Mobile deal 'courts consumers'
	Scottish Widows Investment Partnership notes favourable response
	Customers should fix now, says moneysupermarket.com energy
	Confused.com highlights importance of getting the best deal
	Prices on the rise, says moneysupermarket.com energy
	Bank of Scotland economic report 'suggests transitional phase'
	Clydesdale and Yorkshire Banks security advice issued