The Economic Outlook
George Osborne had a tough time at the despatch box delivering a bleak economic outlook for the nation. In a pessimistic statement, the growth forecast has been cut for this year down to 2 per cent rather than earlier forecasts of 2.4 per cent. In what could be described as a ‘safety first’ budget, Osborne announced government debt targets have been missed and that further austerity is needed.
Taxes and Duty
Osborne has levied a 2 per cent increase in the tobacco duty, which will see the price of an average twenty pack of cigarettes increase by 21p. The beer and spirit duty is to remain the same with no increases planned in the immediate future. The freeze on beer duty has been welcomed by publicans, who argue that duty needs to fall as roughly 50p per pint is taken up by tax.
To appease Conservative colleagues the Chancellor has chosen to freeze fuel duty again. The fuel duty has not increased since 2011, with the majority of the price at the pumps made up of fuel duty. The current rate of fuel duty is 58p and meaning at current market rates of £1.03 per litre, over half is taken up by tax.
The personal allowance is set to increase again to £11,500, this means that as an income taxpayer, the first £11,500 you earn is tax free. Osborne has also increased the 40% tax threshold to £50,000 from £42,500 meaning 500,000 will be lifted out of the higher tax bracket. Largely to the benefit of middle class earners, these tax changes will mean that the wealthiest household on average will benefit by £300.
The government has reduced corporation tax from 20 per cent to 17 per cent. Business leaders have praised the decision.
The sugar tax came as surprise and was obviously designed to grab headlines. The tax is designed to help combat childhood obesity and is predicted to raise £520 million for the Exchequer. The tax has been welcomed by campaigners and healthcare professionals, however, opponents have a suggested that this probably will not reduce consumption considerably. The money raised from this is set to fund school sport.
Government spending is set to decline further, with Osborne still committed to reaching a budget surplus by 2020. The Institute for Fiscal Studies (IFS) has said that there is only a 50 per cent chance of Osborne achieving this goal.
The biggest controversy of the budget was planned cuts to disability benefits. According to the IFS, 370,000 disabled people would have been effected by this decision losing on average £3,500. On Friday, the Work and Pensions secretary Iain Duncan Smith resigned over this proposal and on Saturday the proposals were dropped.