The2009 Budget, confirmed the fiscal
holes that have dominated much of the headlines in recent weeks.
Whether the growth predictions will be realised, and the spending
cuts delivered is the big question, writes Barry Murphy tax
partner with
PricewaterhouseCoopers.
The Chancellor tightened the previously-announced higher taxes
for the wealthier, phasing out personal allowances in full for
incomes of £100,000+ from next year. The planned 45% tax rate on
incomes of £150,000+ will be 50%, and will come in from April
2010.
These changes make the UK one of the most expensive places to
live in the G20 group of nations from a tax and social security
perspective, for those on higher incomes. In addition to worries
about a "brain drain", there is concern about a "brain blockade" as
highly skilled people in the technology industry may now shun
coming to the UK in favour of competing locations.
Despite the higher income tax changes there was a clear message
for the technological future of the UK in terms of ensuring that
"the entire country benefits from the digital age". There was extra
funding for digital investment, aimed at helping extend broadband
networks to every community, enabling the vision set out in the
Digital Britain Report to become a reality. It is welcomed that
the Chancellor should focus on developing the UK's core technology
capability, its scientific knowledge and commit to investment in
the future.
The Chancellor led the way with a £750m Strategic Investment
Fund, to help the UK seize the opportunities ahead, providing
financial support focusing on emerging technologies and regionally
important sectors. Although, the detail of the delivery and
allocation mechanisms for this £750m are still unclear. There was
further promising news from the government announcing a
consultation on ways of making the UK a more attractive location
for innovative activity, and for promoting investment in R&D
and intellectual property.
This reflects developments in other jurisdictions such as
'royalty boxes' which have been used to promote innovation; this is
an indication that the government recognises that the UK needs to
compete with these regimes if it is to attract investment. While
some would have preferred additional measures such as student loan
rebates for science and technology graduates, and further support
to encourage the development of UK talent, any measure of
assistance, given the economic straitjacket the Chancellor is in,
was helpful.
The proof of the pudding is always in the eating and it will be
a case of seeing how in reality the Chancellors 'digital age'
measures transpire, with the first steps for companies being that
they now need to investigate how they might access some of the new
Strategic Investment Fund so as to lead the way.