Budget OBR forecast for growth in %, up from +2.4% in the Autumn Statement, and the biggest revision between Budgets for 3 years.

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Sydney Grant McCoy
5 years ago
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1 Budget 2014 Preamble There was little in today s budget that impacted directly on the education and skills or workforce agendas beyond the now traditional raising of investment levels in apprenticeships. That said, there were some interesting measures introduced that have been designed to stimulate business and manufacturing and the announcements for the Energy sector may chime with the ambitions of some of EU Skills key members. The sector s employers may have found this helpful. Overview In a Budget aimed squarely at what he branded the "doers, makers and savers", Chancellor George Osborne announced that while Britain s economy is recovering, there is a lot of work to do. Commentators had anticipated that Mr Osborne might well pull a rabbit out of the hat and with surprise announcements on pensions and savings he attempted not to disappoint. Other measures likely to catch attention were the introduction of a new welfare cap set at 119bn, as well as an increase in the personal tax allowance to 10,500. This followed the unveiling of a new 1 coin which was leaked yesterday. As you would expect, politics was woven throughout with several announcements and comments aimed at boosting support for the 'Better Together' campaign ahead of Scotland's referendum, not least a freeze on Scotch Whiskey duty. The Chancellor was also keen to reach out to his Party with name-checks for nine Conservative backbenchers: Robert Halfon and Peter Aldous on bingo duty, Andrew Griffiths on beer duty, David Mowat on Survivors for Peace funding, David Mundell on Lockerbie scholarships to study in US, Gareth Johnson and Adam Holloway on house building and garden cities, Graham Evans on the Mersey Gateway bridge and Michael Ellis on his campaign for funding to repair potholes. The Key Elements Economic forecast: OBR forecast for growth in %, up from +2.4% in the Autumn Statement, and the biggest revision between Budgets for 3 years. Example footer January 2014 EU Skills Group Page 1 of 5

2 OBR predicts that 2014 will see economy grow to become bigger than it was before the reception. The economy is growing faster than Germany, Japan and the USA. OBR warns that external factors including an escalation in the Ukraine or instability in emerging economies could damage growth meaning it remains important to build a resilient economy. Unemployment is down to 5% and for the first time in 35 years, the UK has a higher employment rate than the US. Debt: Borrowing is expected to be 108bn in Debt will peak at 78% in and the OBR have revised down the deficit down by 6.6% to 108bn. A surplus of 5bn is predicted for , up from the 2.2bn predicted in the Autumn Statement. Economic measures The Bank of England has been asked to be particularly vigilant about the dangers of a bubble in the housing market. A new 1 coin will be introduced, which will be more secure and less susceptible to fraud. Cuts will continue into the next Parliament, with MPs asked to vote on a Charter of Budget Responsibility. Departmental expenditure Pay restraint in the public sector will continue. The 1bn departmental underspend will be made permanent. A welfare cap of 119bn in will be set, rising to 127bn in to be voted on by MPs next week. 0.7% of GDP will continue to be directed to foreign aid. Taxation The basic rate tax allowance will rise to 10,500, 800 less in tax for the typical taxpayer. The higher rate threshold will rise to 41,865, and will increase by 1% next year. The married couples allowance will rise in line with basic rate allowance. Those signed up to tax avoidance schemes will be required to pay their taxes up front. The OBR confirms this will bring forward 4bn. Example footer January 2014 EU Skills Group Page 2 of 5

3 HMRC s budget to tackle tax evaders will be increased and they will be given additional powers. These will include the ability to collect money from bank accounts and a new unit targeted at migrants claiming benefits they are not entitled too. Stamp duty on residential properties will be extended from those worth 2m to 500,000 and will be imposed at a rate of 15% on residential property over 500,000 purchased through a corporate envelope. VAT on fuel waived for air ambulances and a new air ambulance will be provided for London. Savings and pensions The 10% rate on savings will be abolished. A new single ISA will replace the separate stocks and shares and cash ISAs, and the annual ISA limit will be increased to 15,000, while the Junior ISA limit will go up to 4,000. A new Pensioner Bond will be made available. The rate will be set in the Autumn Statement, but is expected to be market leading. The cap on Premium Bonds will be increased from 30,000 to 40,000 this June, and 50,000 next year. Greater flexibility will be introduced around pensions drawdown the income requirement will be reduced from 20,000 to 12,000 and the 55% punitive rate will be replaced by normal marginal rates. A new guarantee will be introduced so that all those retiring on defined contribution schemes have access to impartial financial advice. Changes to the tax regime on pensions and savings will require a separate Act of Parliament, which will be introduced by next April. Enterprise Annual Investment Allowance to be extended to 2015 and doubled to 500,000, meaning 98.8% of businesses will pay no upfront tax on investment. Corporation tax will reach 20% next year. Under 21s will be taken out of employee national insurance. Business rates discounts and enhanced capital alliances for enterprise zones will be extended for three years. A social investment tax relief at a rate of 30% will be introduced. In the arts, there will be a 20% tax relief for qualifying productions and regional touring. Infrastructure Approval has been granted for the Mersey-Gateway Bridge. Example footer January 2014 EU Skills Group Page 3 of 5

4 Legislation will be introduced to give new powers to Welsh Government to fund their infrastructure needs, including the M4. There will be 140m in additional funding for flood defences across Britain. 200m will be made available for local authorities for repairing potholes. Exports 3bn to be made available in export finance, with interest rates on lending to be cut by a third. Air passenger duty will be reformed duty on all long-haul flights will be cut to match duty on flights to the US and private flights will now be subject to the duty. Start-up finance will be provided for new routes, particularly from regional airports. Energy Recommendations from the Wood Report will be taken forward. A 7bn package will be introduced to cut energy bills for manufacturers. The carbon price support rate will be cut from 2016/17 for the rest of the decade The compensation scheme for energy intensive industries will be extended, aimed at encouraging companies to stay in the UK. A new compensation, worth almost 1bn, will be introduced designed to protect energyintensive firms from green levies. Osborne says half the firms that will benefit most are in the north of England. A third are in Scotland or Wales. Education and skills Grants will be available for 100,000 more apprenticeships and graduate-level apprenticeships will be developed. New science centres will be developed. An Alan Turing Institute to be founded to ensure Britain leads the way in using big data and algorithm research. Housing and planning Proposals will allow for the building of 200,000 new homes for families. There will be further reforms to the planning system and additional funding for house builders. The Help to Buy scheme will be extended for the rest of the decade, facilitating the building of 120,000 homes. Example footer January 2014 EU Skills Group Page 4 of 5

5 New homes will be built in Barking Riverside, Brent Cross and a new garden city built at Ebbsfleet. Duties The fuel duty rise planned for September will not take place. The duty on fixed odds betting terminals will be increased. Bingo duty will be halved to 10% to protect jobs etc. Escalator for alcohol duties has been scrapped and will rise with inflation. Duties for Scotch Whiskey and West Country ciders will be frozen and duty for beer decreased by 1%. Tobacco duty due to continue to rise by 2% above inflation. Example footer January 2014 EU Skills Group Page 5 of 5

A GUIDE TO. Budget FINANCIAL GUIDE. planning impacts

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