Polling day is finally here and from the tax adviser's and taxpayer's perspective, today is not so much the end as the beginning. It looks likely that the results of the poll will not directly decide who goes on to govern us; that will be a matter of feverish negotiation behind the scenes.
Whoever forms a government, there is no doubt that taxes will have to rise substantially in due course; the 1% NIC rise and the 50% top rate of income tax will barely make a dent in the deficit. VAT seems the most likely area to be targeted and the announcement of a significant increase in the standard rate at some future specified date would probably have the perverse effect of stimulating the economy temporarily. I do not think that forecasts of a UK standard rate of 20% in the next couple of years are at all unrealistic or alarmist. We can expect evasion and large scale avoidance to be targeted by all parties, although one wonders how this would be done if there are civil service cut-backs, as appears likely, especially if the Conservatives are in power. Pension fund exemptions and reliefs are also likely to to be whittled away even further. Council tax may rise as central funding diminishes and local authorities resist making cuts. There may be additions to the range of "green" taxes and rises in duty on alcohol, tobacco and hydrocarbon fuel seem inevitable.
In the end, the taxpayer is set to suffer a considerable amount of pain, whichever party is in power. My forecast for the eventual outcome is a Conservative minority government. In my view, the Liberal Democrats will only support one of the other parties if they agree to proportional representation and that will almost certainly mean that we will never have a majority Government again and I doubt that that is something that either Labour or the Conservatives can tolerate.
