Osborne delivers a 2016 budget for the ‘next generation’
The Chancellor of the Exchequer, George Osborne delivered his eighth budget to the nation, but his first as a Conservative Chancellor in a majority government. This meant no restrictions but also for the scrutiny that will surely follow, no-one else to blame.
The budget, Mr. Osborne said reflected uncertainty in the world economy and as such growth forecasts for the UK economy were revised down from 2.4% in the Autumn Statement to 2%. Although the Chancellor did still predict a surplus by 2019/2020 and that the UK would still grow faster than any western economy.
Catchy announcements were the new sugar tax, full academy school status, money for flood defences, lifetime ISAs, further cuts in public spending, debt targets missed, £115 million to tackle homelessness, extension of elected Mayors, 3% reduction in corporation tax, fuel duty frozen and a raise in those lifted out of paying tax.
What the critics say
The Labour Party, in a speech by its leader Jeremy Corbyn, accused the government of successive failures. These included “systematic under-investment in the North”, cuts to disability benefits and putting their “mates” first with reductions in corporation tax. Labour welcomed the tax on sugary drinks but said a generation had been “locked-out” of home ownership and overall the budget was for hedge fund managers rather than small businesses.
In a comical part from the speech, the Chancellor said that former pension minister, Steve Webb, had said that he would like to abolish the tax-free lump sum. He dismissed this and said he would much prefer to abolish the Liberal Democrats. The party’s press team responded in seconds to say that as Mr. Osborne had failed on most of his other targets they were not too worried.
In a shock resignation, a few days later, Iain Duncan Smith resigned as the Secretary of State for Work and Pensions. Putting the blame firmly with the Chancellor, he cited the cuts to disability benefits as disproportionate to the pledges made to middle and high earners in the budget. IDS claimed that it showed that they weren't really 'in it together.'
Main Points from the Budget: How will it affect you?
- Largely unexpected, a new sugar tax will be put on the soft drinks industry. Set for two year’s time it is expected to raise £520m a year. This will be spent on doubling funding for primary school sport in England
- All schools in England to become academies by 2022, ending Local Authority control
- Growth forecast to be 2% in 2016, down from 2.4% in November's Autumn Statement
- A million jobs forecast to be created by 2020
- Inflation forecast to be 0.7% for 2016, rising to 1.6% next year
- Further cuts of £3.5bn by 2020, with spending as a share of GDP set to fall to 36.9%
- Debt targets to be missed. Forecast debt as a share of GDP revised up in each of the next five years to 82.6% in 2016-17 and 81.3%, 79.9%, 77.2% and 74.7% in subsequent years
- Annual borrowing in 2015-6 forecast to be £72.2bn, £1.3bn lower than forecast in November
- Public finances still projected to achieve a £10.4bn surplus in 2019-2020But brrowing forecasts revised up to £55.5bn (+£5.6bn), £38.8bn (+£14bn) and £21.4bn (+16.8bn) in 2016-7, 2017-8 and 2018-9 respectively
- The threshold at which people pay 40% income tax will rise from £42,385 now to £45,000 in April 2017. Will only apply to Scotland if adopted by Scottish government
- Tax-free personal allowance, the point at which people pay income tax, to rise from £11,000 in April 2016 to £11,500 in April 2017
- Capital Gains Tax to be cut from 28% to 20%, and from 18% to 10% for basic-rate taxpayers
- Insurance premium tax to rise from 9.5% to 10%
- Class 2 National Insurance contributions abolished, which the government says gives a tax cut of more than £130 to three million self-employed workers from 2018
- Fuel duty to be frozen at 57.95p per litre for sixth year in a row
- Beer, cider, and spirits duties to be frozen
- Inflation rise in duties on wine and other alcohol
- Excise duties on tobacco to rise by 2% above inflation
- Annual Isa limit to rise from £15,240 to £20,000
- New "lifetime" Isa for the under-40s, with government putting in £1 for every £4 saved
- People who save a maximum of £4,000 towards a home deposit or retirement will get a £1,000 top-up from the state every year until they turn 50
- New state-backed savings scheme for low-paid workers, worth up to £1,200 over four years
- Headline rate of corporation tax - currently 20% - to fall to 17% by 2020
- Annual threshold for 100% relief on business rates for small firms to rise from £6,000 to £12,000 and the higher rate from £18,000 to £51,000, exempting 600,000 firms
- Supplementary charge for oil and gas producers to be halved from 20% to 10%
- Debt interest payments used by larger firms to cut corporation tax bills will be capped at 30% of earnings.
- Petroleum revenue tax to be "effectively abolished"
- Anti-tax avoidance and evasion measures to raise £12bn by 2020
- Use of "personal service companies" by public sector employees to reduce tax liabilities to end
- Crackdown on foreign firms selling products online in UK without paying VAT
- Commercial stamp duty 0% rate on purchases up to £150,000, 2% on next £100,000 and 5% top rate above £250,000. New 2% rate for high-value leases with net present value above £5m. Effective from midnight
- Powers over criminal justice to be devolved to Greater Manchester and Greater London Assembly to retain business rates
- New rail lines to get green light, including Crossrail 2 in London and the HS3 link between Manchester and Leeds
- More than £230m earmarked for road improvements in the north of England, including upgrades to M62
- £700m for flood defences schemes, including projects in York, Leeds, Calder Valley, Carlisle and across Cumbria
- Tolls on Severn River crossings between England and Wales to be halved by 2018
- £115m to tackle rough sleeping and homelessness, funding 2,000 places
- In Scotland, Libor bank fines to pay for community facilities in Helensburgh and for naval personnel at Faslane
- New elected mayors for cities and towns in southern England.