Good Budget for markets

On reflection, I am beginning to see just how astute the Chancellor has been
HOW WAS it for you? Were you satisfied? Do you feel better? Did the earth move? I am, of course, talking about the Budget. But then, what else could possibly have been on my mind this week?

My initial reaction to last Tuesday's delivery was to yawn. Not so much a Brown Budget - more a grey one. On reflection, I am beginning to see just how astute the Chancellor has been. Remember, all he is doing is handing back money he took from us a little under two years ago. And handing it back in a way that ensures that nobody is much better off.

But there were some positive aspects to the 1999 Budget - particularly among the measures he did not announce. There was no attempt to make inheritance tax really bite. Pensions were left untroubled on this occasion. Higher earners are still allowed to keep the bulk of their income.

And he did increase the Capital Gains Tax allowance by more than the rate of inflation, giving a modest, but welcome, boost to the managers of segregated portfolios for private investors.

One of the problems that the stockbroking community has had to face in recent years has been the inexorable drift towards collective schemes as the most tax efficient means of looking after your financial assets.

Simply giving people more of an annual tax free Capital Gains Tax allowance does not reverse this trend, but it does make it easier to justify running a portfolio of individual investments where taking a positive approach to utilising this allowance can add value.

Moreover, among the relatively concealed gems contained within the Inland Revenue's press releases was the news that stamp duty will be more effectively applied to unit trusts and other open ended investment vehicles. In future it becomes payable on the cancellation of units or shares. The justification for this tidying up of the regime is to create more of a level playing field between trading in shares and other securities and in unit trusts. In reality it looks like an exit charge for unit trusts to me.

This measure was small compensation for the news that the City's regulator is to produce league tables of investment products ranked in terms of cost. This is one area where index trackers will do very nicely. It is hard to argue against this approach.

Much of the published information is misleading. I read with interest that one fund, run by a highly respectable house, had annual costs attached of nearly 5 per cent. Tackling the boss of this operation, he told me the figures were inaccurate - but that he was winding up the fund anyway.

Overall I must concede it was not a bad budget for the market - more of a budget for spenders than savers. This is just as well. We have quite enough to worry about when the PEP bonanza comes to an end at Easter.

Brian Tora is head of the asset management division of Greig Middleton