State of the economy
The Chancellor’s budget revealed some highs and lows regarding the current state of the UK economy. Primarily, Osborne announced that the growth forecast for this year halved from 1.2% to 0.6% in December. However, he revealed some brighter points for future growth of the economy. He announced that that the OBR (Office for Budget Responsibility) watchdog forecasts that economic recession could in fact be avoided this year. Growth is also predicted to rise to 1.8% in 2014, 2.3% in 2015, 2.7% in 2016 and 2.8% in 2017.
As for inflation, the 2% target set by the Bank of England is to remain in place. The bank remit is to be changed to focus on growth, and not just inflation.
Spending and Pay
Osborn revealed that most government departments will face budget cuts by up to 1% next year, and they year after. However, the education department and the NHS will be protected from these cuts. Further cuts summing up to £11.5bn have been set aside to meet the needs of the 2015-2016 Spending Review. This figure has risen from £10bn. As for borrowing, the OBR predicts £121bn this year, which is the same as last year, and a further £120bn for 2014-15. Osborne also said the deficit, as a share of GDP, will fall from 7.4% to 5%.
As well as cuts, the Chancellor released the news of an extension of the 1% cap on public sector pay. This policy has been pushed back to 2015/2016 and limits will be enforced on ‘progression’ pay rises within the sector. However, military workers will be exempt from ‘progression’ pay limits. The proceeds from Libor banking fines are to be donated to military cases, an example is Combat Stress charity.
Duties and Tax
Osborne announced changes to duties regarding consumer goods alcohol, fuel and cigarettes. Firstly, September’s fuel duty rise of 3p and April’s 3p rise in beer have been completely scrapped. Instead, beer duty will be cut by 1p. Annual inflation rise of +2% in beer duty is to end. However, ‘duty escalator’ scheme to continue to be enforced for wine, spirits and cider.
Duties on cigarettes are unchanged as of this budget, but prices will continue to rise by inflation +2%. Income tax changes were also announced. The limit at which workers begin paying their income tax is to be raised to £10,000 in 2014. This is earlier than first planned for this reform.
Osborne also revealed that that eco-friendly tax reforms would be introduced. There will be tax incentives for ultra-low-emission cars and tax allowances will be available for investment in shale gas.
Pensioners and Families
A single flat-rate pension of £144 a week is to be brought forward from 2017 to 2016. Osborne also confirmed his caps on social care costs.
There will be a 20% tax relief on childcare up to £6,000 per child as of 2015. Also, £5,000 in compensation payments will be paid out to those who lost money on Equitable Life policies purchased before 1992.