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Budget 20
Overview
What a difference a year makes. Today, the Chancellor delivered his fifth Budget against the backdrop of positive economic news. The employment rate in Britain reached its highest level for five years, the number of people in work increased by 459,000 on the year to reach 30.19 million for November 2013 to January 2014. The Office of Budget Responsibility revised growth forecasts up. GDP is forecast to grow by 2.7% this year and 2.3% next year, then by 2.6% in 2016 and 2017 and by 2.5% in 2018. All of this signals a strengthening economic recovery but the Chancellor stressed that the long road to complete recovery and deficit reduction is not over. The deficit is now forecast to be 6.6% of GDP this year, 5.5% in 2014-15, 0.8% by 2017-18 with a surplus of 0.2% in 2018-19.
Doers, makers and savers were Osborne's targets today. The big surprise today came in the form of reforms to pension taxation and an increase in the personal ISA to 15,000. The Chancellor scrapped compulsory annuities for pensions and introduced a new pensioner bond. These are politically astute reforms from the Chancellor which the Opposition will find difficult to attack. As expected, the Chancellor announced tax changes for low and middle income workers, raising the income tax threshold to 10,500. Other populist announcements included halving bingo duty, 1p off the price of a pint and a timely freeze on Scotch Whisky duty. The Chancellor also unveiled that a new 1 coin would be brought into circulation in 2017, marking the end of thirty years of service for the current coin. This is a largely meaningless announcement but one which has generated a significant amount of media coverage. Leading up to the Budget, the Government announced plans to offer up to 2,000 in subsidised childcare to working families after the next general election, a proposed rise in the hourly minimum wage to 6.50 and an extension of the Help to Buy Scheme to 2020. The Labour Party responded to the Budget by continuing to claim families are 1600 a year worse off under the Conservatives. The Labour Party remains around 4 points ahead of the Conservatives in the polls. Will this Budget deliver the breakthrough the Conservatives need in the lead up to the 2015 General Election? Its a good start.
Budget 2014
Key announcements
Economic forecasts and borrowing
GDP forecast to grow by 2.7% this year and 2.3% next year, then by 2.6% in 2016 and 2017 and by 2.5% in 2018 Deficit forecast to be 6.6% of GDP this year, 5.5% in 2014-15 then falling to 0.8% by 2017-18 with a surplus of 0.2% in 2018-19 Borrowing forecast to be 108bn this year and 95bn next year, leading to a surplus of almost 5bn in 2018-19 The Chancellor repeated his plan to introduce a new charter for budget responsibility, this will be brought before Parliament in Autumn The Chancellor promised to make the 1bn reduction in government department overspends permanent
Budget 2014
Economic bads
Bingo duty will be halved to 10% Beer duty cut by 1p a pint Duty on ordinary cider frozen Tobacco duty to rise by 2% above inflation