In a competent and calm speech, the Chancellor George Osborne started off with some rather good news. He reported that the independent Office for Budget Responsibility (OBR) predicts that the UK will avoid a “technical recession”, but that the Eurozone is still a risk to the UK economy. In a budget which he described as “the budget that rewards work”, he also revealed that the OBR forecasts a 0.8% growth forecast this year for the UK Economy, with a 2% rise planned for next year. This means we should avoid going back into recession, despite countries in Europe (including Germany, who recently announced a drop in growth).
- Child Benefit withdrawn, replaced by income tax charge for households who earn over £50,000 a year. Households earning over £60,000 will no longer gain Child Benefit. Mixed opinion from public, however was already reported as happening. Rich will suffer.
- State pension to be reviewed in the near future. Elderly income tax personal allowance frozen. This is likely to be a key feature of the autumn budget.
- Reduction in top rate of income tax from 50% to 45%. Likely to anger the poor, but again, has been talked about for quite some time. Labour government originally rose the rate from 45% to 50%, so it’s nothing new.
- Reduce main rate of Corporation tax by added 1%, making a 2% reduction from April this year to 24%. Will decrease by 1% each year to 22% by 2014. Great news for businesses, making it more competitive for companies across the global economy. May help the economy.
- New Stamp Duty Land Tax rate of 7% for residential properties over £2million. Lib Dems will be pleased with this, for it’s similar to their plans for a ‘Mansion Tax’.
- Consultation will begin on annual charges on residential properties over £2million.
- Stop tax avoidance, which the chancellor said: “Tax avoidance is morally repugnant.”
- Age related allowances (ARAs) will only be available to those born on or before 5 April 1938. 4.4m pensioners will be worse off as a result
- Issues new Personal Tax Statements for around 20milliopn tax payers. Fantastic idea, will help people understand their taxes, where they go to, how much they pay etc.
- Help small businesses by introducing tax calculated on a cash basis, rather than figures. Making it easier to calculate tax.
Reforms to support growth:
- Look to privatizing roads, and how to finance new national road networks. Was already mentioned at the beginning of the week, no major news.
- Introduce ultrafast broadband to 8 major UK cities, as part of £100mil investment. Nice to see a lot of areas in the North that will benefit, rather than the south.
- Invest £130million in a new Northern Hub rail scheme, and invest £60million in a UK centre for aerodynamics. Great for UK jobs, and again, will benefit the North of the country (although, in terms of Tory voters, may cause a rift between voters and the government).
- Report on South East airport infrastructure over the summer. Is likely to determine the fate of the Thames Estuary/ Heathrow Expansion. One to watch!
- Relax Sunday Trading laws from the 22 July 2012 for 8 weekends to coincide with the Olympics. Already announced last week. Public opinion likely to be mixed.
- Tax reliefs from April 2013 on video games, animation and television industries, to protect shows such as Wallis & Gromit (which the chancellor quipped rather amusingly) and Downton Abbey from setting up production outside of the UK. Today’s announcement of Game Group going into administration likely to overshadow the proposals.
- Publish a strategy of gas generation in the summer, along with major investment in Renewable energy, and simplifying the Carbon Reduction Commitment schemes. One of the biggest surprises was the Chancellor’s reluctance to promote Nuclear Power, which has been in the news recently.
- Tax relief and changes expected for North Sea Oil companies, with investment likely to lead to exploration of Shetland areas in North Sea.
Treasury Special Reserve:
- Special Reserve provision for military operations will be reduced by £2.4 billion, in line with announcement that UK combat operations in Afghanistan will cease by the end of 2014. I remain sceptical on how the government can decide to remove troops so early, despite on-going conflict in Afghan
- Council tax relief for soldiers following £3million investment. Will benefit families of around 20,000 deployed personnel
- Correct loopholes/ anomalies in the VAT System, particularly prices of hot food and soft drinks. Likely to lead to price rises in certain ‘basket goods’.
- New duty on gambling machines. Operators anywhere in the world will have to pay duty on profits generated from UK customers
- No change to Alcohol Duty – although NHS likely to review health care provision for alcohol related treatment. Surprised that government did not decide to introduce minimum fee’s
- Cigarette Duty to rise by 5% comes into effect at 6pm TONIGHT! Price of a pack of 20 likely to increase by 37p. A victory for health campaigners, bad news for smokers.
- No further change to fuel duty, although a 3p rise will come into effect over August. Likely to anger motorists, who hoped for fuel concessions
- Government to increase funds available to invest through the Business Finance Partnership to £1.2 billion
- Gold Reserves worth around £11 billion
- Continued investment in Exports to reinstate Britain as a global player (in reaction to Brazil, India, China)
So what we have is a very interesting budget. A budget which the chancellor called “fiscally neutral”, despite the critics suggesting will harm the majority of the Conservative’s wealthy voters. The budget focused on business, tax evasion and welfare, the latter of which the Chancellor revealed 30% of our taxes go towards. It was a tough stance taken by the chancellor, but in these tough times, action needs to be swift. If the promises are made, maybe Britain will be on the road to recovery?
Please let me know your thoughts on the planned proposals, how they may affect you or your families. Thank you.
Pictures Courtesy of Wikipedia
Apologies for any innacurate information. The link provides you with the full plans.