Download TULCHAN BUDGET SUMMARY

TULCHAN BUDGET SUMMARY
HEADLINES
 Growth – UK grew 2.6% in 2014, faster than any other advanced economy. 2.5% growth forecast
for 2015, up from 2.4% predicted in December.
 Borrowing / deficit – Borrowing to reach a £5.2bn surplus in 2018-19. The Chancellor’s original
debt target set out in 2010 ‘has been met’.
 North Sea – £1.3bn support announced for the North Sea oil and gas sector.
 Pension relief – Lifetime pension relief allowance to be reduced from £1.25m to £1m.
 Tax avoidance – £5bn to be raised from tax avoidance, evasion and aggressive tax planning.
Criminal offences for tax evasion to be published tomorrow.
 Banking – New banking taxes to raise £5.3bn across the forecast.
 Tax return – Abolition of the annual tax return for 12m people and small businesses.
Introduction of new digital tax accounts.
 ‘Sin taxes’ – Beer duty cut by 1p, cider by 2p, whisky by 2p, with wine duty frozen. Tobacco and
gaming taxes remain unchanged.
 Personal tax allowance – Rises to £10,800 in 2015/16 and to £11,000 in 2016/17. 40p threshold
also increased above inflation to £43,300.
 Savings – Major changes announced, including a ‘personal savings allowance’, ‘fully flexible ISA’
and a ‘Help to Buy ISA’.
KEY LINKS
The Chancellor’s Speech
Budget 2015: The Red Book
Budget 2015: Policy Costings
OBR: Economic and fiscal outlook
ECONOMIC FORECASTS
 The Office for Budget Responsibility confirms that Britain's growth in 2014 was 2.6%, the
strongest annual growth since 2007, and the fastest in the G7.
 The OBR has increased its growth forecasts:
For 2015 2.5%, up from 2.4% in the Autumn Statement and 2.3% in the 2014 Budget
For 2016 2.3%
For 2017 2.3%
For 2018 2.3%
For 2019 2.4%
 Faster growth expected this year with growth broadly flat across the next five years.
FISCAL POLICY
Deficit
 The deficit is now down more than a half since its Post-War peak of 10.2% of GDP in 2009-10.
 New deficit forecasts are:
2014/15: 5%
2015/16: 4%
2016/17: 2%
2017/18: 0.6%
2018/19: 0.2% surplus
2019/20: 0.6% surplus
Borrowing
 The Government will borrow £90.2bn this year - £1bn less than forecast in December’s Autumn
Statement.
 Government cash borrowing revised to:
2015/16: £75.3bn, compared with £75.9bn
2016/17: £39.4bn, compared with £40.9bn
2017/18: £12.8bn, compared with £14.5bn
2018/19: £5.2bn surplus, compared with £4bn
2019/20: £7bn surplus, compared with a surplus of £21bn
 National debt as a percentage of GDP:
80.2% in 2015/16
79.8% in 2016/17
77.8% in 2017/18
74.8% in 2018/19
71.6% in 2019/20
Inflation
 The OBR’s revised forecast for CPI inflation in 2015 is 0.2%.
 Lower inflation means that on average the cost of running a household in 2015 will be £450
cheaper than was forecast a year ago.
TAX
 Tax free allowance increasing to £10,800 in 2016 and then to £11,000 in 2017.
 Higher-rate threshold to rise above inflation by 2017-18. It will rise from £42,385 this year to
£43,300 by 2017-18.
 £3.1bn to be raised from a string of new measures on tax avoidance and evasion, including a
diverted profits tax and ending the practice of businesses taking account of foreign branches
when reclaiming VAT on overheads.
 New diverted profits tax to come into force in April 2015.
 Review on avoidance of inheritance tax through the use of deeds of variation.
 Class 2 NICs to be abolished for the self-employed, benefitting 5 million people.
 Simplification of the tax system: Annual tax returns to be abolished altogether and people will be
able to automatically upload them online.
 Fuel duty increase scheduled for September frozen. Fuel duty cuts have saved average family
£10 a year.
BUSINESS
 HMRC will secure £100bn in additional compliance revenue as a result of actions taken to tackle
evasion, avoidance and non-compliance.
 From April 2015 the Government will restrict the amount of banks’ annual profit that can be
offset by carried-forward losses to 50%.
 New banking taxes will raise £5.3bn across the forecast. This includes an increased Bank Levy
from 0.156% to 0.210% from 1 April 2015, raising an extra £900m.
 The annual net burden of regulation on business has fallen by £2.2bn since January 2011.
 There will be a clampdown on "umbrella companies" and entrepreneurs’ relief will only available
to those selling genuine stakes in businesses.
 Simpler business tax system with Class 2 NI contributions for the self-employed to be abolished
in the next Parliament and annual tax return which will now be done digitally.
PERSONAL SAVINGS
 From 6 April 2016, an allowance will be introduced to remove tax on up to £1,000 of savings
income for basic rate taxpayers and up to £500 for higher rate taxpayers.
 Reduction in the lifetime allowance for pension contributions that benefit from tax relief from
£1.25 million to £1 million. The lifetime allowance will be indexed to increase annually by CPI
from 6 April 2018.
 From April 2015, beneficiaries of individuals who die under the age of 75 with a joint life or
guaranteed term annuity will be able to receive future payments from such policies, tax free.
 Those already receiving income from an annuity will from 2016 be able to agree with their
annuity provider to assign their annuity income to a third party in exchange for a lump sum or an
alternative retirement product.
 ISA reforms: from this autumn people will be able to take money out of their account and put it
back at the end of the year without losing any of their tax-free entitlement.
 The list of qualifying investments for ISAs will be extended.
ENERGY AND INFRASTRUCTURE
 North Sea:
o The Petroleum Revenue Tax is being cut from 50% to 35%.
o The North Sea Supplementary Charge is being cut from 30% to 20%.
o There will be £20m of funding for a programme of seismic surveys across the UK
Continental Shelf.
o Oil & Gas Authority to be given powers to scrutinise companies’ plans for
decommissioning programmes.
 Proposals for legislation in the next Parliament for competitive tendering of onshore electricity
transmission infrastructure will be brought forward.
 £13bn of investment to be set aside for the transport system in the North of England.
 £34m of funding for transport in the East of England.
 An additional £16.8m to be provided in funding for flood defences over the next four years.
HOUSING
 First 20 zones outside of London are to be designated for housing: The Government continues to
work with the other 8 shortlisted areas.
 Help to Buy ISA created for first-time buyers: Every £200 saved towards a deposit, the
Government will contribute £50.
 275,000 affordable homes will be provided in the five years from April 2015 to March 2020.
 Public sector enabled to lead development on the next stage of Northstowe.
 Urban Development Corporation (UDC) asked to produce realistic plan for Ebbsfleet’s garden
city. The Department for Communities and Local Government will also announce the Board
members for the UDC.
 Consultation launched to try and make compulsory purchase regime clearer.
BEST OF TWITTER
Fraser Nelson @FraserNelson Editor of the Spectator
Daft for Osborne to talk of UK being most prosperous country in the world. The gap with the USA on
GDP per capita has widened under him.
Andrew Neil @afneil Chairman of the Spectator
Osborne: UK grew by 2.6% 2014. Seven times faster than France -- implication is Miliband =
Hollande. We'll hear lot of that from Tories.
James Quinn @jamesrquinn Group Business Editor of the Daily/Sunday Telegraph
Osborne using data from OBR to paint a stronger UK economy than under last Labour govt numbers moving in his favour, largely #Budget2015
Kamal Ahmed @bbckamal BBC Business Editor
Tories concerned by "friend of big business" attack. Osborne's tax evasion clampdown and new bank
taxes hope to head that off #Budget2015
Laura Kuenssberg @bbclaurak Chief Correspondent and Presenter of BBC Newsnight
All govts want always to clamp down on tax avoidance, goals rarely met - 5bn to get back seems
optimistic!
Dharshini David @DharshiniSky Sky News Business Presenter
GO: tackling aggressive tax avoidance & evasion by clampdown etc - said many times before, &
hasn't raised as much as hoped #Budget2015
Aditya Chakrabortty @chakrabortty Senior Economics Commentator for The Guardian
Difficult to see how Labour responds, given Osborne's retreat on austerity and his clothes-stealing.
One guess might be... that EdM starts talking a bit more in next few weeks about the additional slack
given by Labour's budget plans
Steve Hawkes @steve_hawkes Deputy Political Editor of The Sun
Huge boost to first-time buyers. You save £12,000 Government gives you £3,000
John McDermott @johnpmcdermott FT Commentator
Evidence: Build more houses. Chancellor: Buy more houses. #Budget2015
Robert Peston @Peston Economics Editor for the BBC
Not sure I understand ed_miliband's interpretation of table 2.4 of red book, which shows less
austerity than autumn statement #budget2015