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Watching PMQs, waiting to hear what the Chancellor has to say…
Consistent message from last time: economy is growing, but more to be done. This year’s message – it’s a Budget for a resilient economy.
Emphasis on manufacturing as way of supporting jobs being created across the country.
OBR growth forecast revised up from 2.4% to 2.7%, with a return to trend by 2018
By the end of this year OBR expects the economy to be larger than it was when recession hit in 2008 – Britain fastest growing major economy. However, concerns about Europe and emerging markets, as well as any escalation of the situation in the Ukraine, remain risks. So Chancellor argues that’s why ‘resilience’ matters.
Focus on jobs now – setting out record on employment and unemployment, as well as UK having higher employment rate than USA.
Deficit was 11%; this year will be 6.6%, lower than forecast and don a third. Next year 5.5%, down by half. In 2018/19, forecasting 0.2% small surplus.
Chancellor talking through borrowing figures, then Monetary Policy Committee – and asking MPC to be particularly vigilant about housing market
“Many Chancellors would be tempted to squander the gains” – Chancellor being clear he’s not changing the course, all measures are cost-neutral. Also setting out that this means not just balancing the books but making further cuts – will be cuts in the next Parliament to continue commitment to reducing the deficit. Will bring in new charter for budget responsibility in the autumn.
Continuing with pay restraints in public sector, managing Whitehall departmental finances prudently, cap on welfare bills.
Distributional analysis shows that rich making the biggest contribution to the reduction of the deficit because “we’re all in this together”
Welfare cap set at £119bn in 2015/16 and rise only with inflation.
Tackling foreign home ownership now and loopholes on stamp duty – if buy homes over £500k through corporate entity, 15% stamp duty.
Need businesses to export more, build more, manufacture more – OBR forecast rising export growth in the future. Exports to Brazil, India and China increasing from a low base (our work on cities agrees and shows the main trading partners are Europe). Doubling lending for exports to £3bn and cutting interest by a third.
Just announced start up support for new routes from regional airports
Ouch, tax receipts from North Sea oil down by £3bn. Chancellor making it a point about Scotland and ‘Britain better together’
House building up 23% but not enough. Offering £0.5bn to house building firms, announcing Ciy Deals including new funding deal for Cambridge, and providing £150m finance to support people building own homes. Why got Help to Buy – extending equity loan scheme for rest of decade – get 120k homes built. In SE, going to build homes in Barking Riverside, regenerate Brent Cross and build first new garden city in Ebbsfleet. Going to be Ebbsfleet Development Corporation and publishing prospectus on garden cities. Supporting over 200k new homes for families.
In Autumn will set out detailed plans about projects that will be supported for the rest of the decade. HS2, determined to go further north, faster. Guaranteeing £270m for Mersey Gateway Bridge, Wales gets extra tax and borrowing powers – so can get on with improving M4 – and money for damage down by floods.
Britain needs to lead world in science and engineering – centres for doctor training, cell renewal and graphene
Government investment part of story, need business investment too. Cut business taxes, corporation tax down to 21% in April, high street stores getting £1000 off rates, £2000 Employment Allowance (all announced before)
Business rates discounts and enhanced capital allowances extended for Enterprise Zones for 3 years.
In 2012 annual investment allowance increased to £250k; being extended and doubled to £500k and extended to end of 2015. Cost £2bn in short term.
Got to support manufacturers to see more growth in regions – and for those who doubt this can happen, look at US, 5m new jobs in manufacturing (are they net though?).
£7bn package to cut energy bills for manufactuers, including compensation of £1bn to help protect energy intensive manufacturers. Half of firms that will benefit most are in the North and a third are in Scotland and Wales – big emphasis of importance of being a “Britain that makes things again”.
Hardworking people bit is up next. Freezing council tax, fuel duty, raising personal allowance have all helped hard-working people. Childcare allowance and early years pupil premium to happen now, as is no rise in fuel duty.
Various announcements on bingo and booze…
Personal allowance going up to £10.5k, lifted 3m people out of tax entirely. Just increased the level at which pay 40% tax too – “focus on those on low and middle incomes”.
Help for savers – make ISAs simpler and more generous. Merge cash and stocks ISAs into one, and increase annual limit to £15k from 1 July. Junior ISAs can save £4k.
Pensioner bonds and pensioners will be able to manage their own pension pots – draw down as much income as they want, when they want
No basic rate tax on savings up to £5k
Wrapping up – “this is a Budget for the makers, doers and the savers”
So, some of the announcements for cities include:
– extending the Help to Buy equity loan scheme, creating a £500 million Builders Finance Fund to provide loans to SME housing developers, and creating an Urban Development Corporation for a new garden city in Ebbsfleet
– government’s industrial strategy will include establishing a new Alan Turing Institute for analysing and identifying useful insights in Big Data, and investing another £74 million over 5 years in the UK’s network of Catapults to support the commercialisation of novel technologies. Also £60m for doctoral centres, £25m for graphene/cell centres, £20m for degree & masters level apprenticeships.
– Government will commit £100m to Greater Cambridge until 2019-20 to support their ambitious transport and infrastructure proposals through a Gain Share mechanism, potentially worth up to £500 million over 15 to 20 years and, in addition to Greater Cambridge’s own plans, could deliver over £1 billion of infrastructure investment in the Greater Cambridge area.
– In detailed discussions over Glasgow City Deal
– Availability of business rate discounts and Enhanced Capital Allowances will each be extended by 3 years as an incentive for new and expanding businesses to locate in Enterprise Zones
– government will shortly take forward a Wales Bill that will devolve new tax and borrowing powers to Wales, enabling the Welsh government to raise more of the money it spends and providing it with further tools to support growth in the Welsh economy
We’ll be doing more on this later today, including a podcast on our reflections on the Budget.
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