With this afternoon’s budget changes being leaked on Twitter by The London Evening Standard a good hour before Chancellor George Osborne’s budget speech, it was certainly a day of controversy for the UK Government.
George Osborne started the proceedings by saying the budget is “for hard-working people” and despite the progress which the government has already made, there is still plenty of work to go. There was a rowdy mood in Parliament from the start, with both parties being reprimanded on more than one occasion for excessive jeering – an embarrassing spectacle in which neither party did themselves any justice.
The Budget bases planned expenditure on its expectations of income. This income comes primarily from taxes and these taxes are influenced by the size of the economy. As ever, the government is expecting the economy to grow and Gross Domestic Product growth is forecast as follows:
Notice how growth is expected to increase the further into the future we go. Interestingly, these forecasts are invariable revised downwards as time goes by.
As for the detail, this is the summary:
- Schools and health budgets remain the same.
- Spending 0.8% of our national income on international developments.
- Public Sector Pay increases will be limited to 1% in 2015/16 – with the military being exempt of this cap to recognise their hard work.
- Boost infrastructure by £3bn in 2015/16.
- New Tax Reliefs for Creative Industries with support for the UK Visual Effects Sector.
- Capital Gains Tax Relief for sales of businesses to their employees.
- Britain will have a 20% rate of corporation tax from April 2015 – the lowest business tax of any major economy in the world.
- There was good news for commuters with September’s increase in fuel duty cancelled, meaning petrol will be 13p a litre cheaper than if the duty had not been frozen.
- There were also changes to help potential home buyers. £3.5bn in capital spending over three years; and a loan of up to 20% of a home’s value to be offered to people looking to move up the housing ladder.
- New tax-free childcare vouchers for working families – which sees 20% off the first £6,000 of childcare costs for each child, as well as increased childcare support for low-income working families on universal credit are also being drafted in, as well as the Flat Rate Pension, which is being brought forward to 2016.
- The personal income tax allowance will be increased to £10,000 by next year.
Next to be discussed was the tax avoidance debate. “Too many people were allowed to get away with tax avoidance” declared Mr. Osborne, with the announcement they will name and shame companies who promote themselves as tax avoiders – though whether this will deter companies from avoiding tax remains to be seen.
There was also good news for beer drinkers – with the above-inflation rise in beer duty being scrapped, knocking 1p off the price of a pint; the rise will remain for other forms of alcohol however. How many pubs and bars will implement the 1p deduction remains to be seen, but it was a pleasant surprise to not see an increase for all the beer drinkers out there!
Finally, there is a welcome piece of news for business with the announcement of an Employment Allowance. This reduces the company’s National Insurance bill by £2,000 – meaning that 450,000 small businesses – one third of all employers in the country – will pay no jobs tax at all. This is a significant change which will have a positive effect on businesses, and here at Sibbalds we believe it is one of the more positive and relevant announcements of the day!
George Osborne concluded his speech with this: “If you want to own your own home, help with child care, start your own business and give someone a job, work hard and get on, we are on your side. This is a Budget that doesn’t duck our nation’s problems but confronts them head on.”
Do you agree with what Mr. Osborne has to say? Will the budget announcements affect you, in anyway? Leave your comments and thoughts below.