Chancellor George Osborne delivered his eighth Budget to the House of Commons, dubbing it a ‘Budget for the long term’ but warning that ‘the storm clouds are gathering again’.
Having proclaimed that the British economy is ‘fit for the future’ and that the Government remains on course to achieve a budget surplus of £10.4bn in 2019/20, the Chancellor warned that growing global economic gloom threatens the UK.
With low productivity growth and a weak global outlook continuing to present a ‘dangerous cocktail of risks’, the Chancellor revealed that the Office for Budget Responsibility (OBR) has significantly revised down its economic forecasts for the next five years, with UK economic growth forecast to be just 2% in 2016.
Official figures also revealed that the Chancellor has missed his target to reduce debt as a share of GDP. Borrowing forecasts have been revised upwards to £55.5bn for 2016/17, and the Chancellor announced the need for deeper spending cuts, with £3.5bn of additional savings to be made by 2019/20.
With an EU referendum fast approaching, the Chancellor was keen to point out that the OBR’s forecasts were predicated on there being no Brexit, and claimed that leaving the EU could usher in a ‘period of uncertainty’ for the UK.
The Chancellor revealed a package of business tax measures, announcing that in England the Small Business Rate Relief threshold will rise from £6,000 to £12,000 from April 2017 and promising further radical changes, with the uprating of business rates set to change from RPI to CPI. Greater London will see the complete devolution of business rates from next April.
Meanwhile, for individuals, building on the recent announcement of a new Help to Save scheme, the Chancellor unveiled a new Lifetime ISA, which is intended to allow adults aged under 40 the opportunity to save up to £4,000 a year towards buying their first home (up to a limit of £450,000) or to save towards their retirement, and which the Government will top up by 25%.
Other key announcements on personal taxation included the next step in the Government’s drive to increase the income tax personal allowance, which will rise to £11,500 from April 2017, at which time the threshold for higher rate tax will also rise to £45,000.
Capital gains tax rates will also be cut, with the headline rate falling from 28% to 20% and the basic rate from 18% to 10% with effect from 6 April 2016.
Fuel duty will remain frozen for the sixth consecutive year, while tobacco duties will rise above inflation, and from 2018 a new sugar levy on the soft drinks industry will aim to combat the problem of childhood obesity.
Other significant announcements include additional investment in the nation’s infrastructure, further measures towards the ‘devolution revolution’ and plans to turn every school in England into an academy.