The Budget is the major financial and economic report from the Government. It updates the nation and parliament on the state of the economy and public finances. It is also an opportunity for the Chancellor to review tax rates and make announcements on how money will be spent.
Today’s Budget was probably as expected. A great deal of content on what the coalition government has achieved in the last five years accompanied by commitments and promises of measures that could be introduced in the next Parliament. It was a Budget with something for every part of the UK with the northern powerhouse and other regions featuring. But there was a very noticeable lack of reforms and changes that will become law in the last few weeks of this Government – and indeed little references to further cuts to public services. That’s no surprise given where we are with a General Election just 50 days away.
The Office of Budget Responsibility has raised its forecasts for the UK economy over the next five years, against a backdrop of falling growth in the global economy uncertainty in the Eurozone. The squeeze on public finances is to end a year early in 2018 as the Chancellor commits to using any additional surplus to pay down the deficit. Living standards are higher than May 2010 with households better off by an average of £900.
More measures to clamp down on tax evasion to be announced by the Chief Secretary to the Treasury on Thursday. The introduction of Digital Tax Accounts and the abolition of self-assessment returns Diverted profits tax to be included in next week’s Finance Bill and to come into force in April this year.
Four measures to encourage savings including the introduction of the personal savings allowance, more flexible ISAs, the help-to-buy ISA and giving pensioners access to their annuities. Further reducing the lifetime allowance from £1.2m to £1m by next year. Beer duty cut by 1p. Cider and spirits duty cut by 2%.
It’s a “steady as she goes” budget - no really major announcements coming into effect on 6 April 2015. There will be disappointment that the Chancellor did not decide that the Annual Investment Allowance (gives tax relief on plant purchased) , due to fall back from £500,000 to just £25,000 on 1 January 2016 should be increased. He left it to the Autumn Statement. But businesses decide on investment on a long term basis.
The ICAEW / Grant Thornton Business Confidence Monitor shows investment is already beginning to fall back. Welcome tax relief for North Sea Oil and Gas operators. The measures encourage Local Growth in London, West Yorkshire, Manchester and possibly Cambridge - as well as the announcement of 8 more Enterprise Zones. Finally the OBR growth forecasts for the UK and reduced forecast public expenditure cuts offer business some stability - at least until the election.