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 Wednesday, 17 April, 2002, 18:45 GMT 19:45 UK
Budget 2002: The experts' view
Rachel de Souza (left) and Christine Ross (centre)
Financial experts Christine Ross, head of financial planning at SG Hambros, and Rachel de Souza, tax expert at PricewaterhouseCoopers, give their instant reaction to Wednesday's Budget speech.

Christine Ross, SG Hambros

There were no big surprises in this budget.

The anticipated rise in National Insurance contributions came to pass, and was preceded by much justification that the revenue raised would be directed to the National Health Service.

Employees contributions will rise from 10% to 11% on earnings between 4,615 and 30,940 from next April. The self employed will also pay 1% more up to this level.

In addition, everyone will pay an extra 1% on all earnings above 30,940. Employers will have to contribute on all their employees' earnings above 4,615, and also on benefits such as company cars.

Despite the measures announced to reduce red tape, and a reduction in corporation tax for the smallest companies, I believe this measure will be an expensive one for employers to swallow.

Help for families

Having taken away, the chancellor gave a little back: he extended the Children's Credit to families with joint incomes of up to 58,000 - this was higher than I had expected.

This allowance will also increase in future in line with average earnings.

This was interesting in that allowances have generally risen in line with inflation, which is lower.

Pensioners gained a boost in that their personal tax allowances were increased by more than inflation.

Pensions disappointment

Sadly there was nothing for the saver.

Also, following the lacklustre performance on the take-up of stakeholder pensions, there was no mention of encouraging saving for retirement.

I had hoped there would be some announcement of a review of the need to buy an annuity with a personal pension fund - in favour of a more flexible approach which leaves control of pension assets with the individual.

Review of non-UK workers

He did announce a review of the very favourable tax status of overseas nationals living in the UK, but did not elaborate.

This was something that has caused lots of pre-Budget speculation - I didn't think he would actually do anything here and we have yet to see the detail.

Any tightening of this will not, I believe, raise much additional tax. Instead, these individuals may relocate elsewhere, depriving the chancellor of the higher potential tax take, plus the tax he already receives on any earnings they have in this country.

Overall, he has maintained his stated 'prudence' and his desire to channel benefits to families and small business with a little additional tinkering at the edges.

Rachel de Souza, PricewaterhouseCoopers

The chancellor spoke to us today for about 57 minutes, but did he make us smile or cry?

We have been softened up by many press articles over the past few weeks suggesting that national insurance contributions were going to rise and the rate of VAT would be rising as well.

These measures hit two different classes of people: the national insurance hits only those who work as it paid by employees, employers and the self employed, whereas VAT is a tax on spending and therefore hits everyone.

Tax rises

The chancellor spent a good proportion of his speech on the need to pay for future health reforms so we had an indication that substantial taxes would need to be raised to pay for this.

The chancellor has decided to raise taxes by two main measures; an increase in national insurance contributions of 1% for both employers and employees as well as freezing the personal allowance at 4,615.

Both these measures come into effect on 6 April 2003. For the average individual, this will mean they are approximately 3 per week worse off as from next April.

As the personal allowance will not be raised from next year, this effectively means that more people will be brought into the tax bands as we normally expect the personal allowance to rise with at least the rate of inflation.

Bearable pain

But there was some good news for families with the introduction of the Child Tax Credit and the Working Tax credit from 6 April 2003.

The Child Tax Credit is paid to the main carer and is designed to assist with the costs of raising children.

The Working Tax Credit is designed to provide a guaranteed income to those in full time work of 183 per week for couples and 154 for single people.

This should therefore help to get people back to work by ensuring that they still receive financial support even tough they have started to earn.

All in all, I do not think that anyone will be weeping from the chancellor's speech today. From next April, we will have less money in our pockets but the pain will not be unbearable.

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