Why retailers will have to wait for new budget date

Why does the tax and financial year start on 6 April instead of 1 January? In 45BC Julius Caesar replaced the old Roman calendar with a new one which he called after himself
Why does the tax and financial year start on 6 April instead of 1 January? In 45BC Julius Caesar replaced the old Roman calendar with a new one which he called after himself

Anyone hoping that the government will heed retailers' pleas to switch budget day from early December is likely to experience a long wait, writes Dan White



16 January 2013

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There is no doubt but that announcing the budget on the first Wednesday in December, just three weeks before Christmas, has at least the potential to depress consumer confidence and dampen consumer sales. The leaks in advance of the 5 December budget certainly seem to have had this effect with the value of non-motor retail sales falling by 1% in November. 

However, according to many retailers and their representative bodies, that decline was reversed in December as consumers refused to be deterred by the economic uncertainty and dipped into their wallets. If December sales do prove to be as good as has been anticipated then calls by retailers to move budget day to a less commercially-sensitive date are likely to fall on deaf ears once again.

Budget day origins

Our current budget day arrangements date back to 1996. Up to then the budget was traditionally announced in either February or March – as is still the case in the UK where the budget usually coincides with Cheltenham week in mid-March. A spring budget was favoured as the tax year, and the government’s financial year, traditionally began on 6 April. 

That changed in 1996 when then Finance Minister Ruairi Quinn moved the government’s finances onto a calendar year basis. The change meant that we had two budgets in that year, one in February and the other in December. Quinn’s successor Charlie McCreevy went one step further when he aligned the tax year with the calendar year in 2002. 

Which of course begs the question: given that bringing the government’s financial year and the tax year into line with the calendar year is such a blindingly logical step why wasn’t it done yonks ago? What on earth were we doing with a tax and financial year starting on 6 April instead of 1 January?

A bit of history

The answer lies in a combination of astronomical blunders committed more than two millennia ago and the tortured politics of the 16th century Reformation.

In 45BC Julius Caesar replaced the old Roman calendar with a new one, which he modestly called after himself. While the new Julian calendar was a huge improvement on its predecessor it wasn’t perfect. Without going into the details it lost about three days every 400 years. This meant that by the late 16th century it was about ten days out of sync with the sun, which meant that the Christian churches were finding it increasingly difficult to calculate the correct date for Easter.

Enter Pope Gregory XIII. In 1582 he unveiled a new calendar, the Gregorian calendar at the Council of Trent. Not alone did it rectify its predecessor’s flaws, it also moved New Year’s Day from 25 March (where it roughly coincided with the Spring equinox) to 1 January. While the new calendar, which rectified its predecessor’s flaws, was quickly adopted by most Catholic countries, many Protestant countries, which had only recently split from Rome, took much longer to do so. 

England (with Ireland in tow) was the last major western European country to introduce the new calendar, waiting until 1752, a mere 170 years after the Council of Trent, to do so. By then the Julian calendar was eleven days out of synch with the Sun so, when the new calendar was introduced in England, 2 September was followed 14 September. This resulted in George Washington missing his 21st birthday, which probably explains why he had a hump with the English.

However, instead of shifting the tax and financial years onto a calendar year basis the English merely added the eleven days to the traditional 25 March date moving it to 5 April. This became 6 April in 1800 when the Gregorian calendar skipped a leap year. While we in Ireland moved the tax and financial years onto a calendar year basis between 1996 and 2002, Britain still clings grimly to the old system. 

Chances of moving budget day are slim 

Moving swiftly back to the present, having taken so long to move the tax and financial years onto a calendar year basis, almost 250 years, what are the chances of persuading the government to move the budget date once again? Some analysts have suggested that October would be more suitable.

Well we did once have an October budget in recent times, the late Brian Lenihan’s October 2008 budget, the first of the half-dozen austerity budgets we have endured over the past four-and-a-half years. However, the October 2008 budget was almost certainly a once-off response of a rookie Finance Minister to a rapidly worsening economic crisis. 

Don’t count on it happening again anytime soon. Given that the last change took a mere quarter of a millennia to execute I reckon that we can expect the next one to happen some time around 2250.




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