22 November 1996

ACK :: 0181-652 4053 :: BUDGET FAXBACK :: 0181-652 4053 :: BUDGET FA

DESPITE more buoyant economic figures this week, showing government borrowing under better control, industry tax experts are expecting a "modest" Budget from the Chancellor next Tuesday.

"Whatever the political pressure to be generous, I believe Kenneth Clarke will want to be seen as a Chancellor who does the right thing," said CLA tax specialist Brian Castle.

With inflation ahead of target, he will be wary of putting too much cash back in peoples pockets and the economy overheating.

Most analysts expect some income tax concessions, however, with a 1% cut to 23p in the £ the most likely, and possibly an extension of the 20p lower tax band.

The government also has a long-term objective to remove capital gains tax and inheritance tax altogether. Further improvements to these are expected, possibly by changing the base year for CGT (currently 1982) and raising the exempt threshold for IHT (currently £200,000).

NFU tax expert John Stansfield hopes the government will introduce greater flexibility for the treatment of BSE.

The NFU also wants more generous capital allowances to encourage investment in environment and animal welfare such as water storage and pig housing. Farmers would be unwise to expect too much, says Michael Blake of Coopers and Lybrand. "Farmers had precious little in the last few Budgets. The trouble is, no one is fighting for them in Cabinet."n