Posted: March 16, 2016
George Osborne may have been labelled the “lucky chancellor” in his November statement, but declaring “Britain is open for business” the watchword for Mr Osborne’s eight Budget would be ‘bullish’.
In all the bluster about Britain’s ‘booming economy’, there was certainly good news for business: the Chancellor announced a corporation tax cut. It was 20% at the start of the parliament. By 2020 it will fall to 17%. “Britain is blazing a trail, let the rest of the world catch up,” he said.
Reforms to business rates will mean 6,000 small businesses pay no rates and 250,000 will have their rates cuts from April 2017. Mr Osborne said: “This is a Budget for small businesses.”
The chancellor opened his 2016 Budget with upbeat comments about the UK economy. Mr Osborne said it was growing faster than other major economies, and that Britain was on course for a Budget surplus. He told MPs that the government had taken difficult decisions, and the economy was growing “because we did not seek short-term fixes”.
The Chancellor said the UK was on course to clear its deficit despite facing a “dangerous cocktail” of global economic risks. “The British economy is growing because we didn’t seek a short term fixes but pursued a long term plan,” he said. “It’s a stability first budget with long terms solutions for long-term problems.”
Growth for 2016 will be 2% – 0.4% lower than predicted last year, he said. This will be followed by 2.2% in 2017 and then 2.1% in 2018, 2019 and 2020.
“Eight years ago we were one of the worst prepared countries to deal with crisis; today Britain is among the best prepared to deal with the challenges ahead,” he said.
But the Chancellor also confirmed that he had failed to meet the rule of debt falling as a proportion of GDP this year – this according to the OBR will now not happen until 2017-2018. But by 2019/20, thanks to the extra spending cuts, the UK would see a budget surplus of £10.4bn in 2019/20 and £11bn the following year.
Mr Osborne also added that the growth figures are predicated on the UK remaining in the European Union. He cited the Office for Budget Responsibility’s view that the UK will be “safer, stronger and more secure” if voters chose to remain in the EU in June’s referendum.
Despite a downgrade to the UK’s growth forecasts, Mr Osborne seemed bullish on jobs. OBR reported 150,000 more jobs in the last four months than expected and forecasted a million more jobs over the course of the next parliament. “This is a budget for the next generation,” he said.
The Chancellor announced a series of actions to tackle tax avoidance and evasion totalling £12bn, including moves to end the use of “personal service companies” by public sector employees to minimise their tax liabilities. He repeated his mantra that “we are all in this together” as he said figures confirm the richest 1% paid 28% of income tax revenue.
BUDGET MEASURES – AT A GLANCE
George Osborne has delivered his eighth Budget as chancellor. Here are the main points of what he said.
Health and education
A new sugar tax on the soft drinks industry to be introduced in two years’ time, raising £520m which will be spent on primary school sport
Levy to be calculated on levels of sugar in sweetened drinks produced and imported, based on two bands
Pure fruit juice and milk-based drinks to be excluded
Secondary schools in England to bid for new funding for extra activities like sport and art
Plan for 25% of secondary schools to stay open after 15:30
Plan for all schools in England to become academies by 2022
Plans to enable all pupils to study maths until 18
£500m to ensure “fair funding” formula for schools in England
Libor funds to be spent on children’s hospital services, specifically in Manchester, Sheffield, Birmingham and Southampton
The state of the economy
Growth forecasts revised down for next three years
Growth forecast to be 2% in 2016, down from 2.4% in November’s Autumn Statement
GDP predicted to grow 2.2% and 2.1% in 2017 and 2018, down from 2.4% and 2.5% forecast four months ago
Outlook for global economy is “materially weaker” and UK “not immune” to slowdown elsewhere
The UK will still grow faster than any other major Western economy
A million jobs forecast to be created by 2020
Inflation of 0.7% forecast for 2016
Further spending cuts of £3.5bn by 2020
Spending as a share of GDP to fall to 36.9% by 2020
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%, 74.7% in subsequent years
Debt to be £9bn lower in 2015-16 in cash terms
The deficit as a share of GDP is projected to fall to 2.9% in 2016-17, 1.9% in 2017-18 and 1% in 2018-19
The threshold at which people pay 40% tax will rise from £42,385 to £45,000 in April 2017
Tax-free personal allowance to rise 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
0.5% rise in insurance premium tax
Alcohol, tobacco, gambling and fuel
Fuel duty to be frozen for sixth year in a row
Beer, cider, and spirits duties to be frozen
Excise duties on tobacco to rise by 2% above inflation
Pensions and savings
Annual ISA limit to rise from £15,000 to £20,000
New “lifetime” Isa for the under-40s, with government putting in £1 for every £4 saved
New state-backed savings scheme for low-paid workers, worth up to £1,200 over four years
The Money Advice Service, which has provided financial advice to consumers since 2010, is to be abolished.
Headline rate of corporation tax – currently 20% – to fall to 17% by 2020
Anti-tax avoidance and evasion measures to raise £12bn by 2020
Annual threshold for small business tax relief to be raised from £6,000 to a maximum of £15,000, exempting thousands of firms
Supplementary charge for oil and gas producers to be halved from 20% to 10%
Petroleum revenue tax to be “effectively abolished”
£9bn to be raised by closing corporate tax loopholes and tax minimisation schemes
Use of “personal service companies” by public sector employees to reduce tax liabilities to end
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
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
Tolls on Severn River crossings to be halved by 2018
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
Disability benefits bill to increase in real terms