United Kingdom
Our survey reveals 'The race to Number 10 will hinge on personal taxation' - Stephen Herring
This year’s Budget announcement and subsequent policy changes could be the key to winning power in parliament at the next General Election. Almost half of taxpayers (44 per cent) would change their vote to the party that offered the clearest policy around personal taxation over the next three years, according to our survey of 1,000 individuals.
While in previous years defence, healthcare, education (and more recently, the environment) have taken centre stage as important issues for the electorate, the public’s mind is now focused on the stark realities of the economic climate. But while the majority of taxpayers think the 2009 Budget on 22 April is very important to the UK economy, 51 per cent (probably realistically) also expect it to leave their pockets significantly emptier.
Taxpayers are bracing themselves to take a hit in this year’s Budget. Over one in three (38 per cent) think their own financial position will improve only after 2010. Nobody is expecting a handout, but political parties should take note as voters are looking to the Government to provide clarity and vision on tax measures going forward, and the party that succeeds in doing so, could well see their electoral fortunes improved.
Who should bear the burden: individuals, business or Government?
When questioned on the balance of taxation between business and the individual, nearly half of individual taxpayers (48 per cent) felt that business should bear the brunt. However, taxpayers are also looking to the Government to cut spending, with over half (54 per cent) of taxpayers citing this as the principal way to reduce government debt. Another one in four (28 per cent) agreed that an equal balance of reduced government spending and increased taxation would be the best way forward.
Given the elected Government’s history and reputation for high public spending, it is a surprising turnaround by the electorate to see such a large proportion now look to the Government to reduce public spending – higher government spending having become a central policy of Darling’s and his Labour predecessors. In uncertain times, taxpayers are expecting short term pain but are prepared to ‘pay their way’ as long as there is greater clarity now around personal taxation in future years.
VAT cut leaves sour taste
The public’s negative response to the temporary VAT cuts is clear. More 18-24 year olds than any other age bracket felt the temporary VAT reduction had increased their spending on goods and services, but most taxpayers remained unconvinced of its efficacy. In fact, when polled as to how (if required) they would prefer to be taxed in order to reduce the growing national debt, around one third of taxpayers (32 per cent) chose increases to VAT, a similar percentage to those who chose an increase in income tax.
Clearly our survey demonstrates the importance for both Government and the opposition to take note of the marked shift in taxpayer priorities.
If you’d like more information about how BDO's tax team can help you, please contact your local BDO Partner, or Stephen Herring, Tax Partner at BDO.
Key statistics from our research:
Proposed changes to tax system
- Almost half of taxpayers (44%) would change their vote to the party that offered the clearest policy around personal taxation over the next three years.
- Almost three fifths (59%) of taxpayers rated council tax as the least preferred tax rate to be increased to cover growing national debt.
- The majority (54%) of taxpayers think that government debt can be reduced by cutting its own spending (only 5% thought it could be done principally by increasing taxation).
- Over half (51%) of taxpayers think that those on a basic rate of income should be exempt from paying tax on their savings income.
- Over one third (36%) of taxpayers thought a higher rate of income tax (45%) on incomes over £150,000 was fair and reasonable.
On this year’s Budget announcement
- Almost half (48%) of taxpayers will be taking more of an interest in this Budget than previous announcements.
- One fifth (21%) of taxpayers think Darling has fared worse than Brown did as Chancellor, but over half (55%) feel they’ve done about the same.
- Over half (58%) of taxpayers think the 2009 Budget is very important to the UK economy, while one in ten (12%) think it will make no difference.
* On behalf of BDO, ICM interviewed a random sample of 1002 adults aged 18+ via online between 20 – 22 March 2009. Surveys were conducted across the country and the results have been weighted to the profile of all adults. ICM is a member of the British Polling Council and abides by its rules. Further information at www.icmresearch.co.uk