In his last budget of this parliament, UK Chancellor George Osborne announced a number of measures which, he hopes, will reassure markets that the deficit reduction plan he embarked on back in 2010 will not be compromised, while offering a range of incentives which may also persuade voters to back the Conservatives in the upcoming election.
Forecasts for the UK economy included:
- Growth of 2.5% this year, followed by 2.3% in the following three years, rising back up to 2.4% by 2019.
- Unemployment to fall to 5.3% by the end of 2015.
- Inflation to fall to 0.2%, and remain at this level until 2017, with low inflation a result of falling oil and commodity prices rather than a Euro-style contraction of demand.
- The national debt as a share of GDP, currently at 80.4% is expected to fall to 80.2% by 2015/16, to 78.8% by 2016/17, down to 71% by 2019/20.
- The annual fiscal deficit as a share of GDP, currently at 5% (down from 10% in 2010), is expected to fall to 4% by 2015/16, and move into surplus by 2018/19.
These specific measures announced by Mr Osborne include:
- Freedom for up to 5 million pensioners to access their pension pots (annuities).
- A new Help to Buy ISA, which will enable first time buyers to receive £50 for every £200 they save, to help towards a mortgage deposit.
- More flexibility in terms of withdrawing funds from ISA accounts without penalty.
- An increase in the Bank Levy, to 0.21%, which is expected to raise £5.3 bn over the budget period.
- An increase in the national minimum wage, up to £6.70 per hour, then rising to £8.00 per hour by 2020.
- The abolition of the current Self Assessment tax return, to be replaced by a more flexible system.
- A cancellation of the planned fuel duty increase.
- A reduction in the petroleum revenue tax, down from 50% to 35%.
- New measures to tackle tax evasion and avoidance, and a new so-called ‘Google tax’ on ‘diverted’ profits.
- A rise in the personal tax free allowance, up to £10,600 this year, rising to £11,000 by 2017.
- Spending on a range of infrastructure and business related projects, including a new rail franchise for the South West, an extension of the existing Enterprise Zones, the ‘Northern Powerhouse’ scheme, and new investment in superfast broadband.
- Farmers will be allowed to average out their income over 5 years to spread their tax burden to take into account the volatility of farm incomes.
For more reaction and analysis: