Divide & Blame - Budget 2016

 

Chancellor George Osborne revealed the details of his 2016 Budget earlier today. Last year, he had three bites at the cherry: his pre-election Budget in March 2015, the summer Budget in July 2015 and the Autumn Statement in November 2015.

 

The Political Spin Bit:

It was evident from the speech that there were 3 key messages that George Osborne wanted to get across:

 

1.     Justify the changes you are making now. “Act now to ensure we do not pay later” was repeated 5 times!

 

2.     Appeal to the younger voters who will be crucial in the EU referendum. “This is a budget for the next generation” was repeated 6 times.

 

3.     Ensure everyone was left in no doubt that leaving the EU would be catastrophic and ensure that you quote independent sources (OBR) to back it up.

 

As far as George was concerned, that was an impressive political hat-trick. Probably made all the sweeter by a poor comeback from Jeremy Corbyn. Is he really the best that the opposition can find?

 

Given George Osborne’s experience of ‘budgeting’ you would be forgiven for thinking that all looks good and that we are on track to financial utopia. But that’s probably more to do with his experience of political spin than budgeting. Time will tell I guess but the figures look incredibly rosy even for Tory optimists.

 

 

The Big Messages:

 

            Debt

-       UK economic growth has been forecast down, resulting in the amount of public sector debt increasing to cover the deficit.

 

-       A prediction of bringing a budget surplus of £10 billion by 2020 is forecast. That would take a £31 billion swing in the last year of Parliament. Rather convenient fiction me thinks. The Chancellor’s predicted £10 billion of surplus in 2020 can get blown away in two minutes of a global storm. Let’s not get too excited here.

 

 

Money Coming In:

-       A commitment to stop multi-national companies avoiding UK tax leading to £9 billion in increased tax revenue. This is a nod and attempt to regain lost credibility over the Google tax PR disaster.

 

-       A further tax evasion and avoidance clampdown will increase a further £12 billion of revenue.

 

-       A sugar tax is to be introduced on the soft drinks industry, with the £500 million proceeds used to fund school sports. A big win for Jamie Oliver.  

 

 

To Pay For (Personal):

-       Personal Income Tax Allowance will increase to £11,500 from April 2017 and the higher rate threshold is to rise from £42,385 to £45,000. 31 million people will benefit.

 

-       Fuel duty to be frozen again for the 6^th year in a row (likely to be worth around £75.00 per year to an average driver).

 

-       Beer, cider and whisky duty frozen.

 

-       Capital Gains Tax reduced to 20% from 28% for higher rate taxpayers (reduced from 18% to 10% for basic rate taxpayers), presumably to encourage the sale of second properties and to help address the housing shortage.  

 

-       The ISA allowance will increase to £20,000 from April 2017 and a new Lifetime ISA will be introduced for the under 40’s.    

 

 

To Pay For (Business):

-       Corporation Tax for companies to reduce from 20% to 17% by April 2020.

 

-       Small Business rate relief to increase from £6,000 to £15,000 (at a cost of around £1.5 billion to the public purse).

 

-       The commercial property stamp duty system is to be reformed, with 90% of transactions now better off.

 

-       Class 2 National Insurance to be abolished for 3 million self-employed.

 

-       The supplementary tax charge for Oil and Gas firms in the North Sea is to be halved.

 

 

Stat / Thought of the Day:

Cutting benefits to the disabled raises £1.2 billion. This is the same as the cost of cutting Capital Gains Tax and raising the 40% income tax threshold for the wealthy. Classic Tory politics.  

 

Conclusion:

The Budget is meant to be about balancing the UK’s books and taking action for the greater good going forward. Unfortunately, George Osborne’s last Budget before the Europe referendum in June has been used for political advantage to preserve his credentials as a deficit cutter and bolster his chances of succeeding David Cameron as Prime Minister. Such a shame. We deserved better.