IN WHAT could be George Osborne’s last speech as Chancellor, he delivered a Budget that contains a little something for everyone. He took the opportunity to deliver a rousing party political broadcast, claiming that Britain is “walking tall” again while announcing that there would be no short-term giveaways but rather a continued focus on economic stability and eliminating the country’s deficit.
He was also blessed with a bit of good fortune as falling inflation generated an annual windfall of around £6 billion to give him a bit of pre-election wriggle room. This allowed him to announce tax cuts for savers, which will cost the government around £3bn over the next five years, and unveil measures to help some hard-pressed industry sectors.
Returning to his mantra of “we’re all in this together”, he targeted banks and multi-nationals with additional tax and announced new anti-avoidance rules which he hopes will raise funds to offset some of the giveaways. Raising the bank levy is forecast to generate £4.4bn over the next five years and, given the taxpayer bailout of several UK banks, it will be a populist move as is the proposed “Google Tax” aimed at raising tax from multi-national companies.
Among the most significant measures for the Scottish economy was support for the North Sea oil and gas sector. A series of measures which will cost £1.3bn over the next five years are designed to increase production by 15 per cent by the end of the decade.
The decision to cut the supplementary charge from 30 to 20 per cent, while welcomed, is a reversal of the surprise increase Mr Osborne introduced in 2011. A proposed cut in petroleum revenue tax from 50 to 35 per cent next year, the introduction of a new basin-wide investment allowance next month and £20 million investment to bolster offshore exploration should also stimulate more investment in the sector.
Support for the agriculture sector, with new measures announced to help farmers, are a welcome boost for the Scottish economy.
Farmers will be able to pay tax on average profits – currently two-year averaging applies and this will be extended to five. A bad year can often precede a successful year and, with the fall in milk prices, many are finding cash flow difficult. The measures are expected to come in from April 2016 and we await further details on how it will be applied in practice.
While the Budget may offer a bit of gain with limited pain, it remains to be seen whether it will be an election winner. There are many who don’t share the Chancellor’s rosy assessment, with a number of industry sectors volatile despite growing confidence in the wider economy. Some parts of the UK appear a long way off from experiencing the feel-good factor.
The fall in many average family incomes, as Labour has highlighted, remains a real issue which could have a greater influence on the public – and on votes.
• Susie Walker is a partner and head of tax at Johnston Carmichael
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