Budget might trigger rise in interest rates

CHANCELLOR GORDON Brown”s ninth Budget could lead to a short-term rise in interest rates, according to a leading economist.

Alun Powell, senior economist at HSBC, said this week”s Budget was “fairly neutral” for the economy as a whole, mixing the theme of long-term prudence with some short-term sweeteners in the run-up to the general election, widely expected in May.

“At 3.25% Mr Brown”s prediction for this year”s growth does look a little high, but he”s got a strong track record, so ignore him at your peril.

 “If he”s right, we may well see the Bank of England putting up interest rates to keep inflation down. I would expect a 0.25% rise soon, another in the summer and even another after that, which could cause a marginal strengthening of the pound.”

Farmers are most likely to benefit from the pledge to scale up tax credits and raise the threshold for inheritance tax liability, according to Carlton Collister, senior tax manager for Grant Thornton.

“Tax credit would apply to many farming families on lower incomes. Even though they are very asset rich, the tax credit won”t take account of those assets as long as they are used in the business,” said Mr Collister.

 The Chancellor is also raising the threshold for inheritance tax to 300,000 by April 2008, with steps of 275,000 and 285,000. It would help farmers that have diversified from mainstream farming, for instance by letting out farm workers” cottages, he said.

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