Yesterday, the Chancellor presented his second Budget.
The good news is that he didn’t have to announce any more spending cuts or tax increases - the measures to deal with the financial mess he inherited from Labour were all set out in last year's emergency Budget. But nor could he afford to increase spending or cut taxes so the net effect of the measures he did announce had to be neutral.
This was not, then, a Bugdet like last year's that marked a big shift in strategy. However, it did contain a number of welcome measures to help families with the cost of living and in particular rising petrol prices, including:
- a delay in the planned inflation rise in the duty on petrol, the cancellation of the previous Government's escalator (which added an extra penny on duty above inflation every year) for the rest of this Parliament provided the oil price remains high and an immediate cut in duty by 1p per litre;
- a further increase of £630 in the personal tax allowance, which will benefit everyone but particularly the lower paid. Taken with the increase in last year's Budget, the Chancellor has taken 1.1 million of the lowest paid people in the country out of Income Tax altogether;
- £250 million to help first-time buyers purchase a share in a newly-built property;
- an increase in Approved Mileage Allowance Payments from 40 pence to 45 pence per mile; and
- a one-year delay in this year's planned increase in Air Passenger Duty and a review of the rather arbitrary bands that mean you pay more tax to fly to the Caribbean than California.
But the main aim of the Bugdet was to reform the economy to deliver stronger growth and more jobs in the future. The Chancellor says he wants Britain to:
- have the most competitive tax system in the G20. At the moment, we have some of the highest corporate tax rates in Europe and the most complicated tax rules in the world so he announced a further cut in Corporation Tax, an extension to the rates holiday for small businesses and the abolition of 43 complex tax reliefs;
- be the best place in Europe to start, finance and grow a business. The total cost of regulation imposed on business since 1998 is almost £90 billion a year and the lack of start-up finance is a long-standing problem. To tackle this, the Chancellor announced the abolition of £350 million worth of specific regulations, a three-year moratorium on domestic regulations affecting businesses employing fewer than 10 people, a reform of the planning system, changes to the Enterprise Investment Scheme and a doubling of Entrepreneurs Relief;
- have a more balanced economy by encouraging exports and investment. Under Labour, manufacturing halved and growth depended on debt and financial services. To reverse this trend, the Chancellor announced funding for nine new university centres for innovative manufacturing, £100 million for new science facilities, an increase in the small companies Research & Development Tax Credit and 21 Enterprise Zones across the country to ensure growth is shared throughout the country (I will be lobbying for one of these to be in Croydon!); and
- have a more educated workforce. Britain's working age population has lower skills than in America, Germany or France. If we want stronger growth and more jobs, we have to change that. In the long-term, the school reforms about which I have previously posted will do just that but the Chancellor announced further measures including funding for 24 University Technical Colleges, a work experience scheme that will benefit 100,000 young people over the next two years and funding for 40,000 further apprenticeships for young unemployed people.
There were two other really welcome measures that are worth noting:
- an extra £100 million for councils to repair potholes; and
- reforms to the taxation of charitable giving including simplification of Gift Aid and a change to the Inheritance Tax system whereby if you leave 10% of your estate to charity, the Government will take 10% off the Inheritance Tax rate. The Chancellor estimates that these will be worth £540 million to charities.
To pay for these changes, he announced:
- a two-thirds increase in the charge for non-domiciles who have been in the country for 12 years or more;
- bringing private jets into the scope of Air Passenger Duty;
- a package of measures to tackle tax avoidance that will raise £4 billion over the Parliament; and
- an increase in the charge levied on oil and gas production to reflect the unexpected profits that companies have made as a result of the increase in the price of oil.
All in all, a good budget focused on the long-term.