This week our City Diarists discuss the pre-Budget report.
These diaries are written by people who work in finance and have had a front row seat as their industry goes through the biggest changes in decades.
They give us regular insiders' updates on the mood in the City of London and the dramatic changes in the world of finance.
Laura (not her real name) works for a commercial bank in London
Economists rarely agree on anything but one universal truth is that the balance between regressive (ie not scaleable with earnings) versus progressive (more you earn/spend more you pay) taxation can have notable impacts on an economy and on overall tax revenues and behaviour.
National Insurance will be increased by 1% in 2011
Governments have to be careful how they justify supporting or bailing out one industry or business when they allow another to fail.
Justifications given for not preventing Lehman Brothers going to the wall turned out to be flawed as ripples on a pond are sometimes difficult to predict and symbolic and psychological damage was not properly taken into account.
It is strange then that the government has seemingly put more value on the retail sector than other businesses by choosing to increase National Insurance by 1% in 2011 rather than increasing VAT, particularly given a VAT rise would have raised more revenue than the NI increase.
Most people would think that £20,000 a year is not an excessive or 'middle class' or even 'fat cat' salary. So why did the government choose to increase all our taxes by 1% - a regressive income tax increase?
National Insurance rises may lead to job losses or at best a slower reduction in unemployment in the period when we would expect unemployment levels to be stabilising, if not falling.
It also affects profitability of businesses which could lead to them finding it more difficult to obtain bank funding. Moreover, prolonging potential uncertainty in business does have an impact on both lending and the wider economy.
A VAT increase would have had less impact on small and medium companies (which the majority of us are employed by) and would also not have harmed our export sector as much as the blanket NI rise.
A rise in VAT is still likely as this pre-budget report has not shown how national debt will be repaid so we will potentially have a negative double bubble for consumer and business spending to come.
Governments should look to take as little tax as they can to provide the most fundamental and crucial services to the public, which otherwise would not be provided adequately.
Increasing taxation and then using it to spend more in the current climate is madness and shows a lack of honesty with both individuals and business about the future.
In 'Bank World' this week we continue to discuss ways in which we can be picky lenders. We don't want to lend much more than we did last year while things are still uncertain and businesses are still failing, so we won't. The old "if you only have £10 and 10 people want it, would you give it to this person?" debate is increasingly used.
"We continue to discuss ways in which we can be picky lenders"
I'm naturally a positive person and will fight the corner of a business with credit more often than I don't (which means if I'm not in your corner it must be bad). Increasingly this is a wearing activity and I know several colleagues who just don't bother anymore.
They have an initial discussion with credit about a company who wants to borrow and are confronted with teeth sucking and "Well I think there are several hurdles here, are you sure you want to spend days of work on it?"
Please don't blame your bank manager when a loan/overdraft/asset based lend is turned down.
It's not that we don't like you and not that we haven't tried, it's normally that we have been shot down and been forced to move on, or that we have been rejected so many times we can't sustain the fight.
"Anthony" (not his real name) works for an investment bank in the City.
"The Financial Services Bill is not necessary"
David Cameron called this year's Queen's speech "shameless".
Just exactly what is the pre-Budget report? We never used to have one. One Budget was enough and this report did nothing to solve the problem of the public finances. So why have it? A pre-election report is a more apt description particularly with the bank bonus tax which was blatant and very successful electioneering. A poll in the Sunday Times declared that 79% of voters are in favour of the tax. So job done Mr Darling or should I say Gordon Brown because nobody is quite sure these days which of them is pulling the strings at the Treasury.
The Chancellor says that it will raise £550 million but that is wishful thinking. My guess is that it will reduce the tax take as banks cut back on bonus payments and defer more in the form of shares and increase basic salaries to compensate.
Let's not forget that bonuses are fully taxable at 40% and if the banks cut bonuses then their profits will increase. However, that does not mean that they will therefore pay more corporation tax because most will be able to write that tax off against the enormous losses made in the last two years.
One can't help thinking that the Treasury will have spoken to the ratings agencies before the report was published because one agency, Moody's, has decided not to lower our coveted AAA credit rating. But don't expect that view to last much longer. If that happens interest rates will climb which will jeopardise the recovery.
Followers of this blog will know that I have long advocated a double dip recession. My view has not changed. The government inaction has prevented a resolution to this question until after the election.
If they had acted decisively and cut spending, a victory for the Conservatives would be guaranteed. While, the government continues to put off the inevitable then there remains a chance that Labour might just pull it off and get re-elected.
There has been speculation that we might just have an election at the end of March and I think that makes sense because it can be held before the proper Budget. My guess is that the rating agencies have given the government one more life before action has to be taken.
If we had had another bland fiscally neutral electioneering announcement in the main Budget then the all important rating would have been cut. It is therefore far better to have the election with the voter still largely unaffected by the pain that is on its way. Labour can then fight the election on the basis that they have successfully managed the economy out of meltdown caused by the nasty banks.
But don't be fooled and look across the Irish Sea to get a glimpse at what's coming. Most notably, the Irish government is cutting public sector pay by up to 15% and also benefits are being cut.
In the meantime, I expect you are all wondering how my bonus will be affected. To be honest, I have absolutely no idea.
If I don't get a bonus then I will pay less tax and will not be spending on the new kitchen my wife has requested. So I won't be employing a plumber, an electrician, a decorator and a carpenter. Remember this when you read the unemployment statistics.
"Mark" (not his real name) works for a stockbroker outside London.
The pre-Budget report could well be the last testament of an exiting Chancellor. Mr Darling, as with Labour, have sunk badly since the days when pop stars flocked to be pictured in 10 Downing Street with "celebrity" Prime Minister Tony Blair. Gordon Brown just never had the same feel and you have a sense that there will be a changing of the guard sooner rather than later.
"The PBR could well be the last testament of an exiting Chancellor"
It was therefore, disappointing that Mr Darling could not use his last address to instil confidence into the economy, instead, rather making a mockery of his position.
I base my synopsis of his speech on one phrase, one phrase which just blew me away and basically, assumed I was not interested or taking in anything he actually said.
It was the phrase "we say this from a position of strength". Obviously, the opposition laughed, but I think the country laughed as well, those in financial institutions laughing louder, albeit nervously.
It was just the sound bite that the Conservative Press Office would absolutely love. I, simply fear for the future.
The crisis that engulfed the world was not Labour's fault, or Mr Brown's, or Mr Darling's, or any individual one person failing but to come out with such a ridiculous statement does make you wonder.
I could write thousands of words on an analysis of the Budget but you have probably heard from much more learned individuals than myself.
Bingo Tax was cut to 20% from 22% in the PBR
Therefore, I will focus on the reduction in Bingo Tax. Perhaps the most bizarre thing I have ever seen in a report and certainly, very strange giving this might well be the deciding pre-Budget report before an election.
Obviously, working in financial services, I spend a lot of time in bingo halls and therefore, can positively say this will be a great benefit to the economy. Ethel and Doris, my bingo partners, are delighted!
Our armed forces have poor equipment, hospitals need better equipment, the economy needs boosting. We don't have the money but at least we can enjoy a game of bingo!
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