Budget 2006: Disappointment greets increases in IHT and stamp duty threshold
Gordon Brown's 10th and possibly last Budget speech has received a lukewarm reception from the financial services sector.
Besides allegations of pre-election bribes over the one-off over-65s council tax rebate of last year, the attention of most providers was snagged by the Chancellor's changes to Inheritance Tax (IHT).
The threshold at which estates become eligible for IHT is to be increased from £275,000 to £325,000 over the next four years, a rise that will mean 94% of estates will pay no tax, according to Mr Brown.
The sharp rise in house prices in the last five years has seen more and more people qualifying for the 40% duty and calls for the threshold to be raised have grown increasingly vociferous.
Despite the increase, however, reaction from mortgage lenders and intermediaries was largely negative.
"This announcement is very disappointing and won't win the Chancellor any friends in the long term," said Stephen Herring, tax partner at BDO Stoy Hayward. "Although he has announced the threshold will rise, this will take four years to achieve by which time future house prices may well have removed the effect of the increased threshold,"
These sentiments were echoed by Martin Ellis, chief economist at Halifax: "We calculate that the 2006/07 IHT threshold of £285,000 would now be £425,000 if it had increased in line with house price inflation over the past 10 years.
"We are disappointed that the Chancellor failed to raise the threshold further and believe an opportunity has been missed to lift many ordinary people out of reach of this outdated levy."
Disappointment also followed Mr Brown's announcement that the stamp duty threshold was to be increased by just £5,000 to £125,000, a rise several commentators called "miserly".
Another talking point was the notable omission of the NHS from the Budget, with the Chancellor's only health-related pledge being to increase nursing pay above the public sector average.
Political opponents were keen to take advantage of Mr Brown's silence regarding the health service, particularly since it came on the same day as another NHS hospital announced staff cuts - the fourth to do so in a week.
"Faced with the failure of his billions to deliver corresponding improvements for patients, Gordon Brown and the Treasury have abandoned the NHS," said Shadow Health Secretary Andrew Lansley.
Mr Brown hit back at his critics, reminding them that he has already announced a £6bn funding increase for the NHS next year and a further £6bn the year after. "I do not re-announce things in the budget," he said.
