The first Conservative budget in 18 years and George Osborne seems to have played a blinder.The Conservatives have committed to introduce a “national living wage” of £9 per hour by the end of the Parliament. This certainly knocked the wind out of the sails on the Labour benches. Osborne moved from a minimum wage to a living wage in one stroke and a master one at that.
The Chancellor demonstrated his willingness to wield the axe by scrapping student grants. Introduced a four year freeze in working benefits and from 2017 will save the taxpayer billions by denying new parents tax and benefit credits. The much trailed £12billion in welfare cuts will be phased in over the next three years rather than over the next two years. Housing benefit for 18-21 year olds was also cut.
The Chancellor went on to state the aspirational aims of the new Conservative Government which was to move Britain from a “low wage, high tax, high welfare economy; to a higher wage, lower tax, lower welfare country we intend to create”
Growth over the next three years was downgraded from the budget in March but the Chancellor still expected to move the economy into surplus by 2019/20. The deficit is expected to be reduced from £43 billion this financial year to £24billion next year and £6.5billion the year after with a £10 and £11 billion surplus being forecast for 2018/19 and 2019/2020.
The budget at a glance:
• An increase in the inheritance tax threshold to £1m for married couples by 2017
• Working-age benefits to be frozen for four years - including tax credits and local housing allowance, but excluding maternity pay and disability benefits
• Maintenance grants for students - paid to students with family incomes below £42,000 - to be scrapped and converted into loans from 2016/17
• Corporation tax cut to 18% by 2020
• Fuel duties frozen for the remainder of this year
• A fresh clampdown on public sector pay, which will be limited will to 1% a year for the next four years
• Pensions tax annual allowance to be tapered away to a minimum of £10,000 from next year
• New cars and motorbikes will not need MOTs for the first four years, rather than three
Mr Osborne announced the benefit cap will be reduced from £26,000 pa - the amount one household can claim in a year - would be cut to £23,000 in London and £20,000 in the rest of the country.
The government will also make local authority and housing association tenants in England who earn more than £30,000 - or £40,000 in London - pay up to the market rent, but rents in the social housing sector will be reduced by 1% a year for the next four years.
Mr Osborne confirmed that the BBC has agreed to fund the £650million cost of providing free television licences for over-75s.
The Chancellor unveiled "just under half" of the £37bn in cuts he says are needed to clear the deficit by 2018, with £12bn from the welfare budget and £5bn from a crackdown on tax avoidance. The remainder of the savings will come from cuts to government departments to be announced in the autumn. Although the Chancellor announced that defence expenditure would be increased in every year of this current Parliament committing 2% of GDP to defence over the next five years and extra funding would be made for the security services.
Mr Osborne said the UK economy today was "fundamentally stronger than it was five years ago", with living standards rising strongly”
He said higher tax receipts meant he could implement a "smoother" path to recording a surplus in the government finances, but stressed that he would not back away from tackling the deficit.
"You only have to look at the crisis unfolding in Greece as I speak to realise that if a country's not in control of its borrowing, the borrowing takes control of the country," Mr Osborne said."Britain still spends too much, borrows too much, and our weak productivity shows we don't train enough or build enough or invest enough."
He announced reforms to the "no dom" tax status, saying "anyone resident in the UK for more than 15 of the past 20 years will now pay full British taxes on all worldwide income and gains" from April 2017.
Mr Osborne said the NHS would receive a further £8bn by 2020, on top of £2bn already committed.
Personal tax allowances to rise to £11,000 next year and to £12,500 by 2020 for lower rate tax payers and to £43,000 next year and to £50,000 by 2020.