No one really expected anything radical from George Osborne today, as he has very limited room for manoeuvre plus he said that the government intends to stick to plan A. However, this budget shows that the Chancellor is listening to people’s concerns and compared to last year’s budget the 2013 budget was a pleasant surprise.
It was obvious that the Chancellor was never going to give into his backbenches and make sweeping tax cuts, although it is clear they were not completely ignored, as there were tax cuts. These included a rise in the personal allowance for basic rate taxpayers to £10,000 from April 2014. This will leave the lowest earners have around an extra £100 a year. The Chancellor also showed he has been listening to pub landlords by scraping the alcohol escalator for beer, which has led to a 1p decrease in price of a pint. Stamp Duty in “growth markets” is set to be abolished, and in addition to these tax cuts, the 3p rise in fuel duty has been postponed again.
One of the budgets flagship policies has been designed to deal with the cost of childcare for working families, as of early 2015 the government will pick up the tab for 20% per child of a working families childcare costs which adds up to £1200 per child. This only covers childcare costs up to £6000 per year and is only for families who have working parents, so is not available to families who have one parent who does not work (this includes single parents). The main aim of this policy is to make it easier for parent to go back to work after having children by easing the cost of childcare, emphasising this budgets theme of supporting working families.
Another major policy of this budget is the help to buy scheme, this scheme has two separate parts both are designed to make buying a house easier and get the housing market moving again, and both only apply for properties with a value up to £600,000. The first part of the scheme is that is you put down a 5% deposit on a house the government will guarantee and extra 15% (this will be paid back with interest) so in effect the buyer would get a 95% mortgage rather than an 80% mortgage. The second part of the scheme is for anyone wanting to buy a new build property and will run for 5 years. If the buyer can put down a deposit of 5% the government will provide them with a loan worth up to 20% of the property’s value. This loan will be interest free, and will be paid back when the property is sold. This second part of the scheme has clearly been designed to support the building industry as well as homebuyers. The building industry is one of the areas worst hit by the recession and is likely to welcome this new scheme. Critics of the scheme have warned the government to be careful as the scheme could potentially create another housing bubble.
The Chancellor has also creating a new employment allowance that will reduce companies’ national insurance bills by £2,000 per employee. This is hopefully going to encourage small businesses to take on more staff. The budget also saw a 1% cut in corporation tax down to 20%.
This blog has not covered all the policies in the budget just a few that caught my eye. It is also worth pointing out that not every policy in the budget is positive, for example public sector workers have had their pay increase capped at 1% until 2015/2016. Considering all things, I think this is a robust budget that is making the best out of a bad situation, it is leagues ahead of last year’s budget, and most people got a little bit, of what they wanted. I think it will be much harder to attack the 2013 budget than it was to attack the 2012 budget.