With only 50 days to go until the General Election, Chancellor George Osborne delivered his final budget, announcing that Britain is ‘growing, creating jobs and paying its way’, on the way from ‘austerity to prosperity’.
Summarising, he said that more people in Britain have jobs than ever before, the deficit is down by half and the government are selling more bank shares and getting taxpayers’ money back.
In preparing the Budget, he said that he faced the dilemma of whether we ‘return to the chaos of the past or work through the plan the Tories have been delivering for the country.’ He announced: ‘we choose the future’.
Here is a summary of the main points and how they affect you:
- The Chancellor announced that there would be ‘no unfunded spending and no irresponsible borrowing’.
- The economy is stronger now than 5 years ago and Britain grew 2.6% last year, according to data from the Office for Budget Responsibility (OBR). This is faster than any other major economy.
- Britain will double its support for British exporters who have links with China.
- The OBR report has revised the forecasts for economic growth up for the next few years.
- It predicts:
- 5% in 2015
- 3% in 2016, 2017 and 2018
- 4% in 2019
- The Chancellor announced that unemployment is down by 100,000 today with 1.9m new jobs gained.
- Britain has the highest rate of unemployment in its history, falling to 5.3% this year.
- The claimant count rate is at its lowest since 1975 with 1000 more jobs created every day.
- In the Midlands for example, a new job is created every 10 minutes.
- With regard to real household disposable income per capita, people are now £900 better off and living standards are higher than they were in 2010.
- The GDP per capita is up by 5%.
- The National Minimum Wage, rising to £6.70 from the autumn, will be over £8 per hour by the end of the decade.
- Farmers will be able to average their incomes for tax purposes over five years.
- The forecast for inflation is the lowest on record: 0.2% for this year and will be down for the next 3 years.
Gilts and bonds
- The government will increase the number of long-dated gilts to be sold and redeem the last remaining British government bonds in circulation.
- There will be a new £1 coin using a design from a 15-year-old schoolboy from Walsall
- The National Debt as a share of GDP is falling.
- The Chancellor believes that Britain is on the right track ‘but we must not turn back’.
- The government will sell off £13bn of mortgage assets from the bailouts of Northern Rock and Bradford & Bingley, as well as selling £9bn of Lloyds shares.
- Resources from the bank sales, inflation and lower welfare bill will be spent reducing public debt.
- Interest charges will be £35bn less than a few months ago.
- The Chancellor announced that this government has met its original debt target of 2010.
- Debt as a share of GDP will start falling from 2015.
- The squeeze on public spending will end a year early. The Debt forecast is as follows:
- 2% in 2015-1016
- 8% in 2016-2017
- 8% in 2017-2018
- 8% in 2018-2019
- 6% in 2019-2020
- The deficit forecast is as follows:
- 5% in 2014-2015
- 4% in 2015-1016
- 2% in 2016-2017
- 6% in 2017-2018
- There is a surplus of 0.2% predicted in 2018-2019 and of 0.3% in 2019-2020.
- The borrowing forecast is as follows:
- £90.2bn in 2014-2015
- £75.3bn in 2015-2016
- £39.4bn in 2016-2017
- £12.8bn in 2017-2018
- £5.2bn surplus in 2018-2019
- £7bn surplus in 2019-2020
- Welfare bills will be £3bn lower.
- There will be savings of £13bn from government departments and £12bn from welfare savings.
- The share of income tax paid by the top 1% of the country will rise from 25% in 2010 to 27% this year – higher than in 13 years of the last Labour government.
- There will be a cut in lifetime pension allowance from £1.25m to £1m from 2016, with 55% tax charge abolished and tax applied at the marginal rate
- Chancellor says fewer than 4% of pension savers will be affected
- Lifetime allowance will be indexed from 2018.
- He rules out changing annual allowance.
- Osborne announced that the government will review the use of deeds of variations when it comes to inheritance tax avoidance.
- Legislation will be introduced next week against companies moving profits from the UK offshore
- A tax break for some temporary workers to claim food and travel costs against their tax is to be closed from April 2016.
- The government says it will raise £3.1bn by tackling tax evasion and avoiders.
- It plans to make tax evasion a criminal offence.
- The government will raise the rate of the bank levy to 0.21%, thereby raising £900m per year.
- It will outlaw PPI compensation as an offsettable expense.
Services industries and charities
- The government will back air ambulances by providing further funding for Essex & Herts, East Anglia and Welsh & Scottish air ambulances.
- New defibrillators will be provided for schools.
- There will be £25m provided to help army veterans.
- A further £75m to go to charities for regiments which fought in Afghanistan and government to contribute towards permanent memorial to those who died in Afghanistan and Iraq and help renovate Battle of Britain memorials.
- The government will treble the £15m fund for church roof repairs.
- Automatic Gift Aid will be extended from £5,000 to £8,000.
- There will be new investment in London transport projects.
- £100m given to the race towards driverless vehicles.
- There will be an extension of 8 enterprise zones.
- £7bn given as transport investment for the South West.
- New powers for Mayor of London over skills and planning
- Greater Manchester councils to be allowed to keep 100% of growth in business rates
- Toll for Severn river crossings to be reduced from 2018
- Consultation on £1bn ‘tidal lagoon’ in Swansea Bay to generate green energy
- In 2 weeks, corporation tax will be cut to 20%.
- The government will be extending the small business rate relief from April.
- Chancellor will introduce a single, simple tax allowance to stimulate the oil industry.
- He outlined £1.3bn of support for North Sea oil industry.
- The Petroleum Revenue tax will be cut from 50% to 35% to support oil production in older fields.
- There will be a tax credit for orchestras.
- More support for the gaming industry.
- There will be a consultation on providing local newspapers with more tax support.
- New budget freedoms for national research institutes.
- The digital structure of the country will be transformed to allow more users to access superfast broadband.
- The government is committing to providing ultrafast broadband of 100mb per second.
- There will be more money to improve mobile phone coverage across the UK.
- There will be support for the 5m self-employed by abolishing class 2 National Insurance.
- Annual tax returns will be abolished all together.
- There will be a new digital tax accounts system, which can be updated at any time during the year, starting from next year.
- Transferable tax allowance for married couples to rise to £1,100
- No changes to tobacco and gaming tax.
- Beer duty cut (for the third year) by 1p in the pint, cider duty cut by 2% and Scotch whiskey duty cut by 2%.
- Wine duty has been frozen.
- The fuel duty increase scheduled for September has been cancelled.
- The Chancellor said it would be ‘£10 off a tank with the Tories’.
- The personal tax-free allowance will increase from £10,600 to £10,800 in 2016 and then to £11,000 in 2017.
- 27m taxpayers will be £900 a year better off.
- The threshold at which people start paying 40p income tax to rise by above inflation from £42,385 in 2014-5 to £43,300 in 2017-8
Savings and investment
- The Chancellor wants to create a ‘savings culture’.
- He will change the law from the autumn so that 5m pensioners have access to their annuities
- He will introduce a radically more flexible ISA: you will be able to take money out of an ISA and put it back in without losing tax-free status.
- The government is creating a new ‘help to buy’ ISA for first-time buyers. For every £200 they put towards the deposit on their first home, the government will put in £50.
- From next year, the first £1000 of interest earned on savings will be tax-free, tax-free for basic rate taxpayers, with a £500 allowance for 40p tax ratepayers.
- Annual savings limit for ISA increased to £15,240
- 17m will see the tax on their savings abolished all together.
The Chancellor ended the Budget by saying that ‘optimism returns: Britain is the comeback country’.