George Osborne’s fourth Budget was a pretty gloomy affair, with forecasts having to be downgraded. The predicted 1.2% growth for 2013 has been halved to 0.6%, yet the Chancellor remained confident that the UK would avoid a “triple dip recession”.
In what was a rowdier than usual House of Commons (which is saying something), Osborne repeatedly called this a Budget for the Aspiration Nation, to help those who want to get a job, work hard and own a home. He said that the Government was “slowly, but surely” fixing the country, although the figures do not readily support that assertion.
The view of the Chancellor was that, historically, it is not that the Government has taxed too little, but spent too much (in an attack on the previous Labour government). As a result, he announced a number of additional spending cuts, but ensured that both health and education remained protected, which is clearly good news.
There were a couple of measures that were announced to assist people striving to get higher on the property ladder, to apply from April 2014, referred to as “Help to Buy”. The first part - “equity loan” allows people buying a newly built home to receive up to 20% of the property price as a loan from the Government. The only deposit that needs to be raised by the individuals buying will be 5% of the purchase price. The loan is interest free for five years, and only repayable on the sale of the property. Somewhat surprisingly, there is no restriction as regards income levels to qualify, although the property must cost no more than £600,000.
The second part – “mortgage guarantee”, involves the Government underwriting 20% of the property value, up to a maximum value of £600,000, regardless of whether the property is new or old, in an attempt to encourage lenders to offer low deposit products.
Parents who have recently lost out on child benefit were given a boost with up to £1,200 per child, each year, available where both parents are working, to assist with childcare costs. This applies from April 2015 and is only available providing neither parent earns more than £150,000.
On the tax side, the main rate of corporation tax is to fall to 21% in 2014, as previously announced, and then to 20% from April 2015, so aligning the main rate with the small companies’ rate. This, the Chancellor announced, will give us the lowest rate of corporation tax of any major economy in the world.
The biggest income generator for the Government came in the announcement of the abolition of “contracting out” for national insurance purposes. According to the figures, this is going to generate £5.5 billion per year, when it comes into force form April 2016. This is partially offset by the offering of an additional £2,000 employment allowance for smaller businesses to help reduce the national insurance burden of employing people.
Stamp duty is to be abolished on share transactions for the “junior” markets, such as AIM, whilst those who like a pint will be celebrating with a 1p beer duty reduction to apply from Sunday 24 March 2013.
Anti avoidance came up, as you would expect in the current environment, with announcements that are set to bring in an additional £3 billion per year, introduce a General Anti Abuse Rule as part of the Finance Act 2013 and “name and shame” promoters of tax avoidance schemes.
The Chancellor was pleased to announce that the aspiration of increasing the personal allowance to £10,000 is to be achieved one year earlier than originally predicted, so will apply from April 2014.
Having heard the speech, and seen the releases that followed, this doesn’t feel like a particularly inspiring, exciting or spicy Budget and the jury is definitely out on whether it will spark a great improvement in the UK economy. In curry terms, this is most definitely a Korma as opposed to a Vindaloo!