GEORGE Osborne promised a Budget for “our aspiration nation”. What we actually got seems to be more of a promise of jam tomorrow with most of the positive measures not being implemented for a year or longer.
Mr Osborne did, however, appear to avoid a repeat of last year’s omnishambles, which led to some embarrassing U-turns on proposals to impose caravan and pastie taxes.
It remains to be seen if this will be a fiscally neutral Budget but it was certainly a quiet one. With the Office for Budget Responsibility (OBR) further downgrading its forecast and the recent loss of the UK’s triple-A credit rating, there was always going to be a limited wiggle room for the Chancellor.
While there were some catchy elements to it, most taxpayers and businesses will have to wait until 2014 and beyond before they see many benefits.
Perhaps the most attractive aspect was the announcement raising the personal tax allowance to £10,000. It was a politically astute move and one which will be eventually welcomed by those on lower incomes when it does come into effect next year.
There were other measures aimed at the ordinary taxpayer such as the scrapping September’s fuel duty rise and proposals to assist with child-care costs. Under the plans, a couple could receive up to £1,200 benefit per child, representing 20 per cent of nursery costs. While this will help working couples with annual incomes of up to £150,000, there is nothing here for stay-at-home mums and dads.
Overall, these plans could encourage more economic activity but, interestingly, will be available to families with significantly higher income levels than those used by the government for capping child benefit.
Recognising both the British alignment to home ownership and the importance of construction growth as a means of kick-starting the economy, many will welcome the new measures to get people on and up the property ladder.
Under the new proposals, interest free loans of up to 20 per cent will be offered for up to five years to anyone wishing to buy a newly built house valued up to £600,000. This would include both first-time buyers and current home-owners looking to move house. There are also plans to introduce a guarantee scheme with mortgage lenders to help prospective home buyers unable to afford a large deposit get on the property ladder.
Both measures could stimulate the building sector, a key industry to fuel economic growth, and help more people realise their dream of being a home-owner.
However, the Chancellor will need to strike a careful balance and ensure that these proposals don’t create another unsustainable property bubble, especially at a time when he is counselling banks to lend responsibly.
There were also moves aimed at addressing public concerns over the fairness in the tax system where some businesses and individuals have been publicly criticised for not paying what is perceived to be their appropriate share.
Mr Osborne unveiled plans to develop information exchange agreements with Jersey, Guernsey and Isle of Man governments to disclose savings to Her Majesty’s Revenue and Customs, a practice which has recently been implemented in Switzerland. He also mentioned the introduction of further anti-abuse rules and a “name and shame” policy but the detail of these and whether they will ultimately work when implemented remains to be seen.
There are also welcome measures in the Budget for the business community but, again, it will need to be patient before seeing the benefits from most of these.
The straight line, £2,000 reduction in national insurance contributions (NIC) will help small, hard-up business. While it too will not be implemented until 2014, it should prove to be a cost-neutral measure as it is to be funded by increase in NIC following the abolition of contracting out.
The plans to reduce corporation tax will, in the words of the Chancellor, make the UK the home to “the lowest business tax of any major economy in the world”. While it is a welcome move, it is important to recognise that the proposed 20 per cent rate is the one that small companies currently pay. The new measures will, therefore, only benefit larger firms which currently pay 24 per cent.
Overall, this was a quiet Budget from a tax perspective with one or two big headlines. This will probably be a relief to most of us.
We can now go off and celebrate this fact over a slightly cheaper pint of beer – but not until Sunday because the 1p drop in duty does not come into effect until then.
• Peter Young is a tax partner at Johnston Carmichael
Search for a job
Search for a car
Search for a house
Weather for Edinburgh
Wednesday 22 May 2013
Temperature: 3 C to 15 C
Wind Speed: 22 mph
Wind direction: West
Temperature: 5 C to 10 C
Wind Speed: 24 mph
Wind direction: North