Of course, every day (and most evenings, and weekends) is red box day for Cabinet ministers, but few are as storied as the Budget Box.
The downward revision in European growth is bad news for the UK since it’s our main export market, and the Chancellor got his retaliation in early by starting with that and trying to spin a small upward revision of the OBR growth estimates for this year up from 0.7% to 0.8%. Unemployment to peak this year sounds pretty optimistic. There’s also been a letter from the Chancellor to the governer of the Bank of England reaffirming a CPI target of 2% but also that he wants to see an “activist monetary policy” (ie. more Quantitative Easing) which rather gives the lie to that. The predicted peak in debt is lower, but that’s likely to be due to taking on the Royal Mail pension assets.
Because of the overriding need to reduce the deficit there’s little room to move so this budget, like the Autumn statement, is “fiscally neutral” – that is it moves pots of money around so but spending levels remain as planned. In theory.
The next spending review will focus heavily on reducing the welfare bill. Now, call me cynical but that sounds like a hint that entitlement to benefits will be restricted along with the amount of money reduced in search of the £10bn in cuts that are on the cards. Obviously it would be better to get people off of unemployment benefit and back into work but that doesn’t seem to be in the plan. The pension age will be automatically reviewed in line with changes to longevity which is a smart political move to move responsibility for the upwards revisions which are coming away from the government and into a quango.
There were a number of specific infrastructure investment projects which had been trailed in the Autumn statement last year, including a softening up for Yet Another Airport in the South East – Boris Island? Investment allowances in content creation and oil fields are a good move to stimulate those industries (whatever you think of them), how much these are replacing the allowances that were scrapped not that long ago we’ll have to see the detail. I’m less convinced that what the UK technology sector needs is faster home broadband, it’s arguable that wider access to the internet for households not currently connected would be better. It’s also likely that software development as an industry is already too heavily concentrated around San Francisco and Boston for us to really compete with it and we’d be better focussing on the next thing rather than trying to hang onto the heady days of March 2000. Tax cut on patent’s seems nonsensical, they’re not particularly expensive, if something’s worth patenting the effect of tax on it will be minimal compared to the returns and discouraging duff patents is surely a good thing? Easier access to funding for startups has to be a good thing, we’re remarkably awful at it in this country.
There’s a couple of changes to the tax system, VAT on take away food and a freeze in pensioners personal allowances which means an increase in tax in real terms (but not cash terms).
If you want to see where your tax is spent you can go to http://wheredoesmymoneygo.org/ and of course many people already get an annual statement of what they’re paying in their P60s.
Corporation tax, which is already at a very low rate by global standards, are balanced by a change in the levy so banks don’t benefit and the levy meets the estimates in revenue – which implies that it wasn’t on target before that.
If you smoke get to the news agent, pack of smokes are up 37p from 6pm, alcohol and fuel duty are left unchanged (ETA: unchanged in this instance means “they’re going up as planned” not “the duty remains the same”).
The general anti-avoidance rule is a great move, that’s a big win the Lib Dems will be claiming as theirs. Stamp duty on houses over £2m was heavily trailed but the increase to 15% is huge and, as Ben Goldacre pointed out earlier today, will work to suppress prices at the top end.
The assessment of the 50p tax rate revealed avoidance by shuffling income into the previous tax year which was fairly predictable but could only happen once. Despite this and the announcement of a general anti-avoidance rule  the top rate is being cut to 45p which seems… odd.. to me. The tapering of child benefit withdrawl on people earning over £50k makes some sense from the cliff edge perspective but doesn’t’ address anomalies such as single income couples.
The increase in personal allowance to £9,205 will take many people out of tax, but the lowest earning 10% weren’t paying it anyway gain nothing from it. People like me, on the other hand, get £220 a year so thanks for that George.
#1 by Doug Daniel on March 21, 2012 - 1:51 pm
“It’s also likely that software development as an industry is already too heavily concentrated around San Francisco and Boston for us to really compete with it and we’d be better focussing on the next thing rather than trying to hang onto the heady days of March 2000”
Righty-oh, I’d better pack my bags and up sticks to Palo Alto or look for a new career, then…
#2 by Aidan on March 21, 2012 - 2:29 pm
I’m not saying we’ve nothing – a lot of our financial services employment is on the tech side of things, including my beloved former employer – just that trying to stimulate a vibrant software industry seems a bit backwards looking to me.
#3 by Doug Daniel on March 21, 2012 - 3:29 pm
That’s an incredibly defeatist attitude. Are you saying we should just leave America to it, effectively telling any aspiring Scottish game developers (I’m assuming you mean gaming software rather than just software in general) that if they want to make games they need to pack their bags? Because that’s how it sounds. It’s also completely ignoring the fact that arguably the biggest game franchise in history – GTA – is developed by Rockstar North, right here in Scotland.
It’s a pretty bizarre line considering the IT industry is currently screaming out for developers – my own company has taken on three new developers this year alone and is still looking for more.
Besides, games development isn’t just about the big titles for the main consoles – wee games for phones and social networks are a big part of the present and in the future will only get bigger. Far from being backward-looking, stimulating our games industry is about the second most forward-thinking thing we can do (after renewables, natch).
#4 by Aidan on March 21, 2012 - 4:12 pm
Uhm, no, not what I’m saying at all actually: game development is something we have a decent industry in and it’s worth supporting.
I’m not saying we’ve no market or that there’s no work programming around here, there blatantly is. I’m saying that it’s not something that we should look to generate significant growth around as it’s a mature industry with established centres of specialisation that aren’t here and, because of that, we should be nurturing things like renewable research which aren’t as far along in the industrial cycle and so have more opportunities.
#5 by Doug Daniel on March 22, 2012 - 12:58 am
Aidan, this is possibly the biggest load of mince you’ve ever committed to the internet. It’s a mature industry? Right, I forgot that there have been no advancements in gaming platforms for years. Apart from smartphones and social networking sites obviously, but those are such insignificant markets that they’re barely worth mentioning. Except for the fact that they’re two of the areas where Scotland is performing exceptionally well and which are, err, growing. Gaming is a creative industry – to say it’s matured is like saying there’s no point trying to encourage the film industry because we’ve almost made every film possible and it’s solely remakes from now on.
And of course, this is just gaming software. I was giving you the benefit of the doubt that this is what you meant by “software development as an industry”, rather than what someone like me (i.e. a software developer who doesn’t work on games) would mean by software development, but I’m not so sure now because you clearly don’t have a clue what you’re on about. Software development is absolutely a growth industry, maybe even the growth industry – creative minds will always think of new games to create, and canny folk will always find something else that could be replaced by a computer system. Quite frankly it’s ridiculous to suggest a government shouldn’t be doing its utmost to foster that as much as possible. People will be coming up with new software long after we’ve harnessed as much renewable energy as we possibly can (and they’ll need folk to create the software to run the turbines etc…)
Probably best you stop digging to be honest. You’re completely out of your depth on this one.
#6 by Aidan on March 22, 2012 - 9:40 am
1. A mature industry doesn’t mean no change occurs or no advancements are possible.
2. Scotland doesn’t have a significant comparative advantage in software over other places. Yes, barriers to entry (outside mainstream games which are capital hungry and have razor thing margins) are very low and yes, we have a decent track record but that applies across most of the developed world.
3. Given that I’ve been working in software development for 12 years I do have a *slight* clue what I’m talking about.
My point isn’t that we should all down our copies of emacs and do something else, it’s that if the government is going to subsidise an industry in that way software is a bad one to pick due to the lack of comparative advantage and the stage of the industrial lifecycle it’s in.
#7 by Doug Daniel on March 22, 2012 - 10:46 am
“Given that I’ve been working in software development for 12 years I do have a *slight* clue what I’m talking about.”
That genuinely surprises me from what you’ve said, so perhaps I’m confusing ignorance with pessimism, or just a determination to knock even the one positive thing the Tories have done. There are three clear growth industries at the moment: renewables, life sciences and IT. Scotland has massive potential in them all, and we should be doing all we can to fulfil that.
The very nature of software development makes it different from most other industries. The only limits are human imagination. We should be doing our best to encourage more and more people to get into programming from a young age, doing it at university, and hopefully coming up with great solutions for real-life problems that they can then be encouraged to run with and turn into reality. It’s not like other industries where you’re limited by the laws of physics, or by geography, or by finite resources.
And if we don’t have any significant comparative advantages to other places in the field, then why have Avaloq recently decided to create 500 techy jobs in Edinburgh, rather than Ireland, America, India or anywhere else?
#8 by Aidan on March 23, 2012 - 11:52 am
Again, I’m not saying we’ve got no IT industry or that it has no role to play in our economy. I’m saying it shouldn’t get government subsidies.
I’d agree that programming is a skill that needs to be widely taught in schools and university as it will help solve real-life problems but that’s because it’s becoming a necessary part of every industry.
Most development that’s done in Scotland that get’s lumped under the “IT” label is inextricably tied to either university research (which we’re bad at turning into real companies for a varity of reasons, including poorly developed VC markets) or is done as part of servicing some part of the real economy such as oil and gas geophysics visualisation.
If the government is going to subsidise industries it should be subsidising those bits of the real economy we’re looking to develop, not software houses. The only people making money in that world who aren’t Apple or online advertising sellers like Google and Facebook are Open Source based companies who tend to be highly distributed and largely self-selecting.
If we want to encourage the software side of the economy generic structural reforms such as better developed venture capital markets, more support for people starting their own business and easier access to public sector contracts are much better methods to persue than a targetted tax break like this.
#9 by Aidan on March 23, 2012 - 12:01 pm
Oh, and the rapid commodification of the software market by Free Software over the last 10 years in everything from embedded to machine learning to webservers, databases and application containers and the large scale consolidation of companies into Apple, Google, Microsoft, Oracle and Facebook is, I think, pretty strong evidence of being well past the rapid growth phase of the industrial lifecycle.
#10 by EphemeralDeception on March 21, 2012 - 7:44 pm
I rally cannot believe this comment.
Personally I went to university with the creators of lemmings in Dundee and till recently worked as a consultant for SAP which is the No1 in the world in many areas as a European company starting in a small industrial zone in the small town of Walldorf in Germany.
There are many examples of Scottish software companies doing well even in the US. Gael is an example. The software market is so huge that even small companies can do well quickly and have an international reach.
There is a large pool of tech savvy talent in Scotland from hackers to entrepreneurs.
Your input “software industry seems a bit backwards looking to me”. Please, please have a rethink.
#11 by Aidan on March 23, 2012 - 11:53 am
The plural of anecdote is not data. I’m not saying we’ve got no tech industry, or that it’s got no future in the country. I’m saying it’s not worth subsidising in that way.
#12 by Doug Daniel on March 23, 2012 - 1:22 pm
No, what you actually said was “It’s also likely that software development as an industry is already too heavily concentrated around San Francisco and Boston for us to really compete with it” (implication, intended or otherwise: “so we shouldn’t even bother trying”) and “trying to stimulate a vibrant software industry seems a bit backwards looking to me” (implication, intended or otherwise: “software development is an industry of the past”).
I’m sure you’ll claim otherwise since you’re never wrong, but to people who read that, it sounds like you’re saying IT is the wrong horse to back and we should concentrate on other industries instead. They certainly don’t sound like testimony to the important part software development should and will play in the future of our economy.
Just a thought, but if you really mean “this is the wrong way to support the software industry in Scotland” then why not just say that?
#13 by Angus McLellan on March 21, 2012 - 4:26 pm
Oh, joy be unconfined! Win £126 with the increased allowance, lose £126 with the squeeze on the basic rate band. That’s a tick in the “fiscally neutral” box.
A “general anti-avoidance rule”? Isn’t that going to turn out to be like the Tooth Fairy? And the “mansion tax”, will that apply to companies in the BVI buying houses?
So what was the point then? Ah, yes, smokescreen for the cut in the top rate. Silly me.
#14 by Jeff on March 21, 2012 - 4:36 pm
A cracking review there Aidan, nice work.
I agree with much of what you say, though I shallowly get excited by the idea of Boris Island despite knowing we should fly less, not more. I’m a sucker for branding.
The only thing I really wanted to say is that the tax cut on patents is probably a good thing as in many instances you can’t have a startup without a patent and, although not extremely expensive, I was put off going for a patent last year (for an idea which, incidentally, will break my heart if/when I see it in the shops).
Maybe I’ll have another look at it if George is reducing the barriers to entry.
Oh, also, I get that £220 a year too. There was some great analysis on Guardian showing that the increase in the tax allowance to £9,205 is actually regressive as it helps all tax earners, and double income households most of all.
#15 by Aidan on March 21, 2012 - 5:26 pm
Thanks Jeff! Don’t get too excited about that £220 yet, saw a rumour that the red book has the upper rate tax band starting point being revised downwards to cancel out basic rate change for those of us who pay it. Which is fair enough I guess but wasn’t mentioned at the time.
#16 by Jeff on March 21, 2012 - 10:10 pm
Ah, yes, that rings a bell now you mention it. Good move from George that, I grudgingly admit…
#17 by mav on March 21, 2012 - 10:48 pm
a good move? Not really. It drags 300k more people into upper tax bracket. Why should earning < 1.5 * average earnings put you into the upper earnings bracket? Especially when anyone in that bracket is routinely referred to as 'rich' by both sides of the political divide. 42k a year is good, but (especially on single income houses with kids), it is far from rich.
#18 by Tormod on March 21, 2012 - 4:51 pm
As always I will wait for the din of battle to subside and wait for the details of the big red book of HMT.
I got a company car this year so I will bepaying BIK on it as well as my other items, health / dental insurance etc.
As always enjoyed reading Aidan.