Ryan Bourne – Tax thresholds are still a mess
The further rise in the personal allowance was welcome, though once again the 40p threshold will only be increased by 1 per cent (less than inflation). The Chancellor likes to claim that someone on, say, £45,000 will pay less tax. But, of course, most people see nominal wage increases and prices are increasing. According to the figures in the Budget, someone earning £45,000 this year would earn £46,125 next. The combined effect of the increase in the personal allowance and the 1 per cent increase in the 40p threshold would still see them paying more tax next year, and more tax as a proportion of their total income. After years of fiscal drag in income tax, stamp duty and inheritance tax, we still need a new law to automatically upgrade thresholds in line with inflation or wages.
The savings reforms give people more freedom, which is welcome – though the government shouldn’t be competing for capital by paying above market rates in Pension Bonds. Much of the rest of the budget was fairly fiddly – with lots of industries picked out for various tax breaks, making the tax system more complex still. And on energy policy, the government is having now to use taxpayer money to compensate for its own decisions on renewables subsidies and green taxes which have pushed up energy costs.
Ryan Bourne is Head of Public Policy at the Institute of Economic Affairs.
Cllr Sir Merrick Cockell – Positive news for local government
Today’s announcements from the Chancellor for extra money to tackle potholes, flooding, new homes and apprenticeships are all positive news for local government.
Councils need to continue to press the point that they are best placed to help deliver growth, tackle the housing shortage and help drive down youth unemployment. It is vital that councils, working with local partners, are at the front of the queue to access this extra cash.
Cllr Sir Merrick Cockell is writing as Chairman of the think-tank Localis.
Kathy Gyngell and Laura Perrins – The childcare scheme is barmy
The latest childcare scheme finally disenfranchises the single-earner married family and the stay-at-home mother. It continues the ideologically-based ongoing tax and benefits redistribution from single-earner to double-earner parents.
Yet it does not even have the benefit of making any economic sense. It is not just unfairly targeted (giving a grotesquely unjustifiable childcare payment for the rich). It is a handout with no guarantee of any tax return to the government, or for that matter to GDP. The minimum qualification amount – for the lower earner to earn £50 a week – is well under the basic rate tax threshold.
Nor does it address the real underlying problem of total childcare costs – of the government’s own creation – caused by the conditions of registered and formal care and the discouragement of family-based and informal childcare. Shifting an even greater proportion of childcare costs from customers to taxpayers does nothing to address this – or the real needs of children for home-based care.
Kathy Gyngell and Laura Perrins edit the website The Conservative Woman.
Ruth Lea – Steady as we go
The Budget was without big surprises, though none the worse for that. The growth forecast was revised up compared with the 2013 Autumn Statement, as expected, for 2014 (from 2.4 per cent to 2.7 per cent) and 2015 (from 2.2 per cent to 2.3 per cent) with minor downgrades to the growth projections for 2017 and 2018. There were modest improvements to the public finance forecasts, with underlying Public Sector Net Borrowing (PSNB) expected to be £108 billion in 2013-14 (compared with £111 billion, forecast in December). But, and it cannot be emphasised often enough, borrowing is still very high. There were no great “giveaways” and the Budget was, arguably, neutral over the forecast period from 2014-15 to 2018-19 (inclusive). There was modest fiscal stimulation in 2014-15 and 2015-16 of around £½ billion each year, followed by three years a mild tightening.
Concerning personal taxes, the personal allowance was raised to £10,500 from April 2015, as expected. But there was no increase in the 40p threshold on top of the 1 per cent increases for April 2014 and April 2015, as already announced. Newly announced tax avoidance measures were expected to raise a total of nearly £4 billion from 2014-15 to 2018-19 (inclusive).
There were helpful moves for business, including the extended and increased annual investment allowance (from £250,000 to £500,000 to December 2015) and restraints on the Carbon Price Floor to moderate energy prices, especially helpful to energy intensive manufacturers.
Caps for the welfare budget (though excluding state pensions and job seekers’ allowance) were set from 2015-16 to 2018-19 (inclusive). Whilst these are welcome in principle, “the proof of the pudding will be in the eating”.
Ruth Lea is Economic Adviser, Arbuthnot Banking Group.
Andrew Lilico – Well done for sticking to deficit reduction
Osborne stuck to the deficit reduction plan and resisted the temptation to use better growth for giveaways, which was good. The changes to green taxes constitute the effective abandonment of whatever was still left of the UK government’s attempts to prevent climate change through controlling CO2 emissions – again, good. The overhall of pension savings is interesting and should have desirable impacts on double taxation of pensions for now, but as interest rates rise rapidly and life expectancy rises over forthcoming years, the appetite for taking up annuities will rise, also.
Nonetheless, it’s a good performance from Osborne again, who – with the exception of 2012 – has produced excellent Budgets throughout this Parliament.
Andrew Lilico is a Director and Principal of Europe Economics.
Christopher Pincher MP – Thanks for reading, Chancellor!
The Chancellor has heard the calls from makers, savers and taxpaying workers and responded by:
- Doubling the annual investment allowance to 2015, capping carbon price support at £18 to 2020 (Lib Dems wanted £30), and extending business rate discounts. This is good for enterprise, which is good for exports and jobs.
- Adjusting the 40p threshold whilst increasing the lower rate payment trigger means a tax cut of £800 for basic rate payers whilst the non-rich caught in the 40p bracket benefit too. Middle income and aspirant tax payers should be pleased.
- The radical flourish was reserved for pensioners and came near the finish – an end to forced annuities and punitive tax raids on lump sums plus an increased drawdown limit.
- Finally, great news for bingo players as gross profits tax is cut in half improving the chances of better prize money. The Chancellor must have read my ConHome piece yesterday!
Christopher Pincher MP is the Member of Parliament for Tamworth.
Ruth Porter – Welcome measures for savers, but the underlying problem remains
This budget highlighted some crucial elements: economic credibility, a boost to savings and the need for investment. More detail around the welfare cap, which combined with the new fiscal rules is important, but without including state pensions it won’t be as effective. The ISA increase, along with more flexibility on annuities, is to be welcomed but the underlying issue – that people are simply not saving enough from a young enough age – remains untouched. The Annual Investment Allowance extension is a significant policy in helping with productivity, but an Employers’ NI cut would have pushed that investment towards labour more directly.
Ruth Porter is Head of Economic & Social Policy at Policy Exchange.
Simon Richards – The big state remains
The highlight of the Chancellor’s budget speech was his genuinely amusing remarks about Magna Carta. Unlike the Prime Minister, he evidently knows what it means! The Freedom Association has been well ahead of the game in highlighting the impending 800th anniversary and, more importantly, the importance of Magna Carta in securing the rights of individual citizens over and above the rights of the state. Given that, Mr. Osborne has done little to reduce the excessive size of government.
I urged him to scrap carbon tax altogether. He has done something to minimise the damage they cause business and individuals, but nowhere near enough significantly to reduce the unnecessary high cost of energy.
He was right to warn that there is so much more to be done before we begin to reduce the government’s debt to acceptable levels, but, yet again, he has concentrated on tinkering. That is a missed opportunity.
Simon Richards is Chief Executive of the Freedom Association.
Ryan Shorthouse – A Conservative Budget
Stick with us, the Chancellor is saying: we’re the sensible ones. And we’ll reward sensible behaviour – savings in particular. Generally, this was a conservative budget, with a small and a big c. Thankfully, childcare was a big winner, with families on nearly all incomes benefiting from a generous package of measures. HM Treasury sees childcare as a treasure chest, crucial for boosting parental employment and children’s education, thereby enhancing individual and national prosperity in the long-term
Ryan Shorthouse is the Director of Bright Blue.
Stephen Tall – A Conservative AND Lib Dem Budget
No wonder both Lib Dems and Conservatives are equally happy with today’s Budget. The Lib Dems’ top manifesto priority – raising the personal allowance to £10,000 – was delivered last year and bettered this year, with the first £10,500 you earn now free free of income tax. The Conservatives will continue to try and adopt it as their own, though the polls suggests voters (rightly) give Clegg the credit. But that wasn’t the promised “rabbit” of this year’s Budget – that was the far-reaching liberalisation of pensions which will give retirees much greater freedom of choice. This is a significant move championed by Lib Dem pensions minister Steve Webb, but its chief beneficiaries happen also to be the Tories’ core constituency. It’s almost like there’s an election coming up.
Stephen Tall is Co-Editor of Liberal Democrat Voice and a ConservativeHome columnist.