Another Budget Day, another series of delectable sound-bites knitted together with some lovingly cherry-picked statistics.
George Osborne was expected to roll out an Earth-shattering list of accomplishments today when he delivered the final Budget for this Parliament. Commentators and journalists had spent the last week whipping themselves into a frenzy, speculating about potential tax breaks and placing bets on how many metaphorical rabbits the Chancellor had up his sleeve… or something. Unfortunately, aside from a couple of well-timed quips about Miliband’s multiple kitchens, today’s Budget was supremely uneventful.
The Chancellor spent around an hour regurgitating statistics straight from a report by the ‘totally impartial’ Office of Budget Responsibility. According to this report, the UK economy grew by 2.6% in 2014, faster than any other advanced economy in the world – but lower than the 3% predicted in December. Inflation is expected to fall to 0.2% this year and the unemployment rate is expected to fall to 5.3%. Welfare bills are set to be an average of £3bn lower each year than predicted in December, and interest charges on government gilts will be £35 billion lower.
So far, so good. Whether you believe it is solely up to the achievements of the Coalition, or a happy coincidence of Government policy and an ongoing global shift which has led to these positive figures, there’s no doubt that the economy is looking a lot stronger now than it did five years ago. So much stronger, in fact, that Osborne pledged that the squeeze on public spending will end a year earlier than planned, saying that public spending will increase in 2019/20 in line with economic growth. Disappointing for those of us hoping for further cuts (and eventual eradication of most, if not all, Government bodies), but it’s a crowd-pleasing pledge, and that’s what this Budget was about.
Following this train of thought, Osborne went on to promise a rise in adult, youth and apprentice minimum wage rates and the abolition of the annual tax return and national insurance contribution for the self employed – to be replaced by some sort of online system. This is the ‘greenest Government ever’, after all.
As predicted, Osborne eventually turned his affections to the North, wheeling out one of the bookies’ most anticipated phrases: The Northern Powerhouse. Manchester and Cambridge are to keep 100% of growth in business rates rather than redistributing it to other regions and there will be a further 8 Enterprise Zones set up, including new ones in Plymouth and Blackpool. Furthermore, there will be new powers for the Mayor of London, specifically over skills and planning. This new push for devolution will prove interesting over the next few years. It will either encourage a shift in political ‘safe-seats’ (which I suspect is what the Tories are hoping for) or it will backfire and produce a collection of hyper-controlling fiefdoms, creating a somewhat tribal environment for the UK, most likely based on accent.
The Chancellor then rattled off a string of tax pledges. The government will conduct a review on the avoidance of inheritance tax through the use of deeds of variation and will report on this by the autumn. There will also be a ‘fresh crack down’ on tax evasion, which the Chancellor is hoping will raise an extra £3.1bn towards reducing the deficit. The personal tax free allowance (allowance!) is to go up to £10,600 in 2 weeks, £10,800 next year and then £11,000 in the year after next – very generous, considering that it was around £6,000 under Labour. The higher tax rate will also rise above inflation, from £42,385 this year to £43,300 by 2017-18.
And then came the metaphorical rabbits…
The fuel duty increase scheduled for September has been cancelled, wine duty has been frozen, 2% has been cut from cider and whisky duty and 1p has been cut from beer duty. Cigarettes will go up by 16p a pack as planned, along with the introduction of plain packaging, the implications of which were outlined at the last Libertarian Home meeting. Good news for drinkers, expected news for smokers.
From 2016, the “Lifetime Allowance” for pension savings will be reduced from £1.25m to £1m – meaning any pension larger than £1m will be taxed at 55% – and it will be indexed to inflation. ISAs set up by first-time buyers will be topped up: where £200 is saved by an individual, the state will add £50. There will also be a new personal savings allowance of £1,000, or £500 for higher rate tax payers.
Far from the fun theatrics of the December Budget, the Chancellor’s pledges today felt safe and far more statist. The deficit is still a problem which was being tackled quite fiercely up until now but Osborne’s decision to call it off early will most likely lead to a slow slide back into bloated public sector funding. Rather than going out with a bang, the Chancellor has opted to burn out. Now we must wait to see what the next Parliament will do to us.
Photo credit: LendingMemo.com