During the last 12 months the full extent of the worldwide financial crisis has become apparent.  Governments of the world have put together a series of financial packages to try and ‘cure the problem’.  The UK, having experienced 16 years of growth, has now had to take steps to halt the slide into depression whilst at the same time trying to stimulate the economy and as far as possible preserve jobs.

There is a large hole in the public finances which needs to be filled and the Daily Telegraph headline of 6 April 2009 put it quite succinctly when it trumpeted “Taxpayers face £500 bill to plug Britain’s black hole.”

The big question is how will the hole be filled whilst at the same time keeping money in circulation and stimulating confidence in the economy?  We have already been told that tax and national insurance will rise and the cut in VAT last year was seen by many to do little to restore confidence as consumers, whilst wanting to take advantage of a ‘bargain,’ grappled with trying to reconcile their spending whilst fearing for their jobs.

This year the scope for surprise has been curtailed by announcements already made in last year’s Budget and the Pre-Budget Report.  Furthermore, the Chancellor has a problem as he is:

• unable to raise more revenue immediately; and
• he does not have room to make further tax cuts to stimulate the economy

Increases in taxation are being considered and most would reluctantly agree that taxes will have to rise.  We expect most increases to take effect from 2010 and beyond; in keeping with previous Budgets we can also expect notification of future increases to be made in advance.

It is therefore highly likely that the Budget will focus heavily on:

• enforcement of existing taxes;
• powers to combat avoidance; and
• consultations about the future shape of the tax system.

With what we already know here are our predictions for the Budget 2009.