Summary: According to Chancellor George Osborne, Britain is making a comeback.
In what may be his final Budget announcement to the House of Commons this afternoon, Mr Osborne outlined an economic recovery, help for businesses of all sizes and ‘a Britain that is working again’.
With a General Election just weeks away and the polls exceptionally tight, this Budget was unsurprisingly designed to highlight the Conservative Party’s track record on the economy and the deficit.
According to Mr Osborne,
“We cut the deficit and confidence is returning. We limited spending, made work pay, backed business – and growth is returning.”
But is Britain really on such an incredible comeback?
A real recovery
According to Chancellor George Osborne, the Coalition Government’s original 2010 debt target ‘has been met’, with debt as a share of GDP now forecast to start falling in 2015-16.
UK economy grew 2.6% in 2014, faster than any other advanced economy and now has the potential to overtake Germany as the most prosperous nation in Europe.
In addition, employment in the UK has reached its highest ever levels, with the jobless rate set to fall to 5.3% this year.
As a result of the growing economy and more people in work, the Chancellor was keen to point out that the National Minimum Wage, currently £6.70, is due to reach £8 an hour by 2020, effectively wiping out a key Labour election pledge to raise the minimum wage to this level within the same time frame.
Oil and gas
The oil and gas industry makes a significant contribution to the UK economy, but has recently been hit by a falling oil price, causing great tremors in the market.
Following calls from the Scottish Government for Westminster to do more for the industry, the Chancellor took several steps in this Budget to attempt to reduce the shocks felt by the low oil price.
To encourage further investment in the North Sea, the UK government will introduce a new oil Investment Allowance and will reduce the supplementary tax charge on oil and gas companies from 30% to 20%. In addition, the rate of Petroleum Revenue Tax paid on older oil and gas fields will also be reduced from 50% to 35%.
These changes are expected to increase oil production by around 15% by 2019 and drive £4bn of new investment over the next five years.
Tax avoidance has been a key part of the Tory agenda for the past few years in an attempt to offset their image as the party of big business and tax cuts for the richest.
In the Budget 2015, Mr Osborne announced new measures to increase tax on “diverted profits”, where a company moves profit offshore in order to escape tax, set to come into effect next month.
Taken together, all the new measures against tax avoidance and evasion will raise £3.1bn over the forecast period.
Other business taxes set to change include a full review of Business Rates to help smaller firms, new tax credits for TV and film studios, the scrapping of the annual tax return altogether, and a further cut in corporation tax to be cut to 20%.
In his Budget address, Mr Osborne said that “Future economic success depends on future science success”, and as a result the sciences and other heavy industries look set to be the big winner from this Budget, alongside the creation of the ‘Northern Powerhouse”.
The government is investing £140m in world-class research on infrastructure and so-called ‘cities of the future’, with a further £40m into the Internet of Things and an ambition to promote ultrafast broadband across the UK.
The government is investing up to £600 million to deliver better mobile networks, a commitment to provide WiFi access in public libraries. An additional £16m will go towards boosting UK flood defences and the automotive industry by investing £100m to stay ahead in the race to driverless technology.
The Chancellor also announced an increase in UKTI’s resources and scope in order to double support to British exporters to China, in light of Britain’s need to expand links with the faster growing parts of the world.
Immediately following the Budget, businesses and other supporting organisations had their chance to respond.
John Longworth, Director General of the BCC, said:
“Businesses in every corner of the UK want more sustainable public finances, and they also want governments to take steps to support growth. Once again, it appears that the Chancellor has pulled off a difficult balancing act, maintaining fiscal discipline while ensuring that necessary deficit reduction doesn’t undermine the UK’s growth prospects.
“Lower business taxes, allowances for investment, and targeted support for sectors, regions and small companies all contribute to confidence, investment and job creation.”
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Mar 18, 2015.