The emergency Budget on 22 June will represent the first step for the coalition government towards reaching its goal of significantly reducing Britain's structural deficit. However, its shot at goal is far from clear of obstructions.
The coalition agreement identifies not only the government's agreed fiscal policies but also the tightrope to be walked to achieve the right balance between reduced spending and increased taxes so as to protect the fragile economic recovery.
Public-sector cuts appear inevitable but the coalition agreement indicates that these will go hand-in-hand with arrangements to protect those on low incomes. One example is the proposed increase in the 6,475 income tax allowance, although an increase to 10,000 is likely to be more of a long-term goal.
Much has been made of the 1 per cent employer national insurance contributions increase that was proposed to take effect in April 2011. This change will, nevertheless, go ahead but with the impact softened by an increase in the lower income threshold at which employers' NI starts.
A key concern for investors and employee shareholders alike is the potential for significant rises in the 18 per cent capital gains tax rate. A change to align CGT rates on all assets with an individual's income tax rate might be the most straight forward answer but is probably the least likely.
Historically, entrepreneurial activity has been encouraged via reduced CGT rates, as low as 10 per cent on certain "business assets", such as shares in un-quoted trading companies. Any rate change that stifles these kinds of incentive would be bad news at a time when fledgling businesses could be the lifeblood of the recovery.
A return to the old taper relief rules, a Labour government creation, is unlikely. However, an alternative might be to tax a percentage of gains on certain assets as income but with favoured treatment for "business assets" and longer-term investments. Since the funds raised from a CGT rate increase have already been earmarked to pay for the coalition's flagship personal allowance increases, a CGT rate increase for non-business assets, such as second homes and shares in quoted companies, would appear inevitable.
Clarification as to what qualifies as a "business asset" will be key. Employee shareholders might hope to have their shareholdings fall within the favoured category, although the weight of public opinion against the private-equity industry may mean that interests held by private- equity house management/ employees would fall in the less favoured category.
Although the tax receipts from a prospective CGT rate increase would not crystallise for more than 12 months, any change could still give the economy a cash-boost if transactions are accelerated to take advantage of the current lower rates, as happened in the run-up to April 2008.
However, a short-term increase in VAT rates to at least 20 per cent would go much further towards refilling the Treasury's coffers and could result in a bounce in VAT receipts between now and the effective date of the changes (given that at least a six month run-in would be needed for business to make the necessary adjustments).
Whilst Scotland may suffer more than most if the proposed banking levies are imposed, one sector conspicuous by its absence from the coalition agreement is the oil and gas industry. An absence of change, or indeed some much needed incentives for capital investment both in the North Sea and Scotland's burgeoning renewable energy sectors, would be much welcomed.
Ultimately, short-term tax changes on 22 June must not come at the expense of certainty in the UK tax system. Recent years have seen the relocation of a number of big names outside the UK.
Certainty in the UK's fiscal and economic environment is a necessity if this balance is to be redressed. Chancellor George Osborne's first Budget must tread a fine line between taking real tangible steps towards tackling the deficit and being a Budget for long-term certainty.
Rhona Irving is head of tax Scotland at accountancy firm PricewaterhouseCoopers.