Have we just witnessed the first of 2 or 3 budgets in 2015?
With an election looming there is every chance a change in lead party or an incoming minority Government will result in at least one further budget between now and the end of the year, more if we have to run the election process again inside 6 months. But that is speculation, we will have to wait and see what happens – for now we have got Mr Osborne’s actual budget to run the rule over.
To understand who benefits from a budget I always try to visualise the most beneficial or the least affected person. Dependent on the phase of parliament it is easier to spot one or the other and with an election just 50 days away it was always going to be easier to find the worst off in this one, with pre-election budgets typically attempting to touch everyone somehow.
So if you recognise yourself in the following description, I am afraid it is more of the same:
A mid 40’s, employed single person earning approx. £25k per annum, saving a modest pension. He or she is a 20-a-day smoker but does not drink, they live in their own house on the Kent/Sussex/Surrey borders with an average mortgage. They are non-religious and did not serve in the armed forces!
So as you can see, this was a budget that only left a minute percentage of the population without a token gesture.
As many predicted it was not a big giveaway but conversely it was not as austere as others suggested it may have been – with the Chancellor opening on positive news about revised forecasts for GDP and positive comparisons to our near neighbours in Europe.
There are few headline stories which reflected the economy as Mr Osborne portrayed it – neither flying nor failing – but starting to walk tall again after a particularly tough decade.
As ever we have distilled the budget into some key facts and split these out into general outlook, business and personal.
General Economic Outlook
- The Office for Budget Responsibility (OBR) has revised world and European forecasts down but revised the UK up with growth anticipated of 2.5% in 2015, 2.3% consistently from 2016-2018 and then 2.4% in 2019
- Business investment is more than 4x that of 2010
- In 2014 the north grew faster than the south
- Welfare costs are £3 billion lower than forecast in Autumn 2014
- Interest on UK debt is lower than anticipated
- Combined with lower welfare and lower interest costs, the sale of bank shares (£13 billion from Northern rock and Bradford and Bingley and £9bn from Lloyds) will enable the pay down of national debt
- Debt as a percentage of GDP is falling and is forecast to be 80.4% in 2014/15 dropping to 74.8% in 2018/19
- The chancellor is anticipating a surplus of 0.2% by 2018/19 falling from the forecast deficit of 5% in 2014/15
- Mr Osborne anticipates £30billion of additional savings will be required by 2017/18 and this will be generated from Government Departmental savings (Cuts), further savings on welfare payments and clamp downs on aggressive tax evasion and avoidance measures
- The bank levy will be increased to 0.21% which is expected to raise an additional £900 million
- There will be more help for businesses seeking to export to emerging and growing markets such as China
- Farmers will now be allowed to average their income over 5 years
- There will be a clampdown on intermediaries, agents and shell companies that create and exploit tax loopholes or divert profits – generating £3.1 billion in additional tax receipts
- Charities – The automatic Gift Aid allowance will increase to cover the first £8,000 raised – up from £5,000
- Class 2 National Insurance will be abolished for the self-employed
- Business rates (NNDR) calculation will be reviewed with a view to changing the charging system
- National Insurance will be abolished for those under 21 and in 2016 NI will be abolished for apprenticeships
- Duty on beer, cider and whisky reduced, wine duty is frozen as is tobacco
- The lifetime allowance on pensions will reduce from £1.25million to £1m. This is only expected to hit around 4% of pensioners
- The personal allowance for income tax will increase a further £200 in 2016 and 2017 making the allowance £11,000 by April 2017
- The higher rate income tax threshold will increase to £43,300 by 2017/18
- Annual tax returns will be abolished in 2016 and replaced with real time analysis of personal tax
- The fuel duty increased planned for September will be cancelled
- Pensions – as announced before the budget 5 million pensioners will be able to access their existing annuities
- Help to Buy ISA’s were launched giving first time buyers the opportunity to have their deposit savings held tax free and be topped up by the Treasury
- Personal savings allowance was introduced meaning that the first £1,000 of interest on all savings will be free of tax – this is reported to mean that 95% of savers will not pay tax on their savings
- The transferable married couples tax allowance will be increased by £1,100
Other budget announcements of note
- Blood bikes will now be able to recover VAT on fuel
- Essex & Herts, East Anglia, Wales and Scotland will get funding towards new air ambulances
- The Church roof fund, which was oversubscribed, has been trebled
- Funding for WW1 memorials and celebrations, projects and memorials for specific battles was announced