George Osborne’s final budget before the election was in many respects an extended party election broadcast hyping the achievements of the past and holding out all sorts of promises for the future. So here’s what he’s got planned.
The State of the Economy
The big message was to convince voters that the economy is in safe hands with the Conservatives and that Labour would return the country to rack and ruin. He boasted of a Britain which is the fastest growing developed economy in the world at 2.6%, although that’s down from December’s forecast of 3%. GDP per capita was up 5%, employment was at record levels with 80% of those new jobs being full time and 80% skilled. Welfare bills were down, business investment was up and the north of England grew faster than the South.
It all played into his claim to be creating a recovery which benefited the whole country – not just London.
Finally he announced a sale of £13bn of assets in Northern Rock and Bradford and Bingley incurred by the bank bailout, which will be used to pay down debt. His message was simple: while Labour gave money to the bankers, the Conservatives were busy taking it back.
Anyone who works for themselves knows the horror of those annual tax returns. Yesterday he killed off the tax return allowing people to access digital accounts and pay their bills off when they wanted.
This is not just about appealing to a key bunch of likely voters – it’s also about trying to haul in some of the mysterious missing income tax. Every year tax receipts are lower than expected. That’s either because people are being channelled into low paid jobs or because a certain amount of income is going missing.
By making it easier for self-employed people to pay their full share, he hopes tax receipts will be a little less disappointing in the future.
Once again the threshold beyond which people start paying tax is on the up. In 2015/16 it will rise to £10,800 and the year after that it will hit £11,000. Meanwhile the higher rate tax band will also pop up from £42,385 to £43,300. Corporation Tax will be cut to 20% in two weeks’ time.
Petrol duty is to be frozen with September’s planned increase scrapped in a move which he claimed would save people £10 every time they filled up.
Drinkers got their annual penny off a pint promise, while he cut 2p off whisky and cider and froze wine duty. Tobacco and gaming taxes remain unchanged and he also announced a new horse racing betting right.
One of the biggest questions in the run up to the budget had been what he planned to do for the struggling North Sea oil industry. Plunging oil prices have seen major giants such as Shell and BP cut investment in this area, putting one of Britain’s key assets at risk.
He announced plenty of new measures for oil companies including a cut of the supplementary charge placed on oil producers from 30% to 20% and a new tax allowance to encourage investment in the area. The government will also be investing in seismic surveying to unlock hidden reserves of oil.
Another much hyped area received less attention than expected. Much has been made of the so-called Northern Powerhouse, with the Conservatives keen to show they are pushing more investment away from London. However, measures were a little vague. There was talk of more devolved powers to the regions, deal with Manchester Council to keep 100% of the money from the rise in business rates, a new rail franchise for the south west of England, reductions in the toll for the River Severn crossing from 2018 and a move to offer support for Wales and the Midlands.
There were also moves to get the financial services to pay more. Just as banks had benefited from public support during the crisis, he said, now it was only right and proper that they give something back. He announced the bank levy would rise to 0.21% which he argued would raise an extra £900 million in revenue. Tax avoiders also came into his cross hairs. A tax on diverted profits would target those multinationals which move their profits offshore
Pensions and Annuities
One of the most important announcements made today related to the pensions market. The changes that the government introduced to the pensions market in 2014, making annuities non-compulsory, will be extended by 2016.
George Osborne announced that pensioners who have already purchased annuities will be able to exchange them for cash, which will come as a further blow to shareholders of the already struggling annuities providers.
As of April next year, over five million annuity holders will be free of the restrictions that have forced them to keep their policies and will be able to sell the policy back to the provider.
The Chancellor announced more flexible ISAs. Anyone would be able to transfer money out of an ISA and back in without losing their tax-free allowance.
Lower rate tax payers will pay no tax on the first £1,000 of income earned through their savings while higher rate tax payers would pay nothing on the first £500 while pensioners would have more access to their annuities. The mantra is to increase help for savers and give them more power and more choice.
One of the big highlights, though, was the creation of a ‘help to buy ISA’ where the government promised to top up savings towards a deposit. For every £200 saved towards a deposit, the government promised to top it up with £50.
What was missing?
In his response to the Budget Speech Ed Miliband pointed out that there had been no mention of new investment into the NHS. Also missing in action was anything on the environment.
The Conservatives have long since dropped the slogan ‘vote blue, go green’, but this was a budget in which they tried to pretend climate change didn’t exist and people weren’t show to point that out.
No sooner had he sat down than #climate was trending on Twitter. Caroline Lucas, the Green Party MP, was quick to voice her discontent. “Just weeks after PM signs #climate pledge highlighting economic threat, not one mention of climate or carbon from Osborne #fail #budget2015.”
Instead this has been a budget designed for the Tories’ ground troops. It’s an attempt to convince those who might be worried about savings, their pensions and their income that there is light at the end of the tunnel.
This was, then, was an extremely political budget. Osborne tried to head off some of Labour’s major attacks by softening his line on public spending cuts and stealing Labour’s policy of reducing the lifetime pension cap from £1.25 million to £1million.
The speech was full of the usual slogans – such as Britain was “paying its way again”, “walking tall” or pinching a line from Bullseye by “staying in the black and out of the red”.
There was plenty for savers, pensioners and the self-employed.