What Budget 2015 means for you and your family

Protestors take part in a demonstration in central London ahead of George Osborne's budget. Picture: Getty
Protestors take part in a demonstration in central London ahead of George Osborne's budget. Picture: Getty
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Tom Peterkinm Scott Macnab and Andrew Whitaker distil the detail of George Osborne’s budget.

Health

THE Chancellor said the NHS will receive a further £8 billion by 2020, with Scotland receiving 10 per cent of that in consequential funding under the Barnett Formula – the system used to distribute cash across the UK.

Mr Osborne said it was clear that the under-pressure health service is in need of additional government funding and so it would be getting the extra money on top of £2bn already committed.

A five-year forward view – a plan for the NHS south of the Border which was published last year – forecast a funding gap of £30bn by 2020, set out plans to achieve £22bn in efficiency savings and said additional funding of £8bn would be needed.

The Chancellor promised to “fund the government’s objectives”, including making the NHS a seven-days-a-week service by 2020/21.

Mr Osborne told MPs: “That plan requires very challenging efficiency savings across the health service, which must be found.”

Economy

THE Budget will see welfare cuts, net tax increases and three years of higher government borrowing to loosen the squeeze on public finances.

An expected return to a budget surplus has been put back a year to 2019-20. Spending will be £83.3 billion higher in total over the current parliament than the coalition suggested in March. Also announced were tax cuts costing £24.6bn – primarily cutting corporation tax, raising the income tax personal allowance and extending inheritance tax relief for main residences.

These are to be financed from £47.2bn of tax increases, including in dividend taxation, insurance premium tax and vehicle excise duty, plus cuts in pension tax relief, earlier corporation tax payments, and anti-avoidance and evasion measures. Welfare cuts will raise £34.9bn. Other decisions will raise £8.1bn, including reductions in departmental capital spending and a cut in funding for the BBC.

Student grants

UNIVERSITY student maintenance grants are to be scrapped and replaced by loans, revealed the keynote Budget announcement on higher education funding.

Mr Osborne also said university tuition fee caps would be linked to inflation for institutions offering high-quality teaching.

Mr Osborne labelled the changes a “major set of reforms”, but said they were vital to ensure Britain’s long-term economic future. However, the funding shake-up will not apply in Scotland where education is devolved and Scottish students studying north of the Border do not have to pay fees.

Bursary support of up to £1,750 is also available for young students from low-income families in Scotland.

Student loans are available in Scotland based on household income, with the maximum amount available being £5,750 a year for a young student, and £6,750 for an “independent” student if the household income is less than £17,000.

Defence

BRITAIN will meet the Nato spending target for defence, George Osborne announced, with a series of commitments in the Budget to protect such expenditure.

The Chancellor committed the government to spending 2 per cent of national income on the military every year of the decade and raising the Ministry of Defence’s budget by 0.5 per cent a year in real terms.

The announcement ended months of speculation over the pledge.

Until now, ministers had not committed the UK to spending at that level beyond the current financial year, prompting pressure from backbench MPs and military chiefs.

A new £1.5 billion Joint Security Fund will invest in military and intelligence agencies.

Recipients of the Victoria Cross and George Cross will see annual pension annuities rise from £2,129 to £10,000, with the policy paid for by fines imposed on banks.

Meanwhile, the UK Government will fund a memorial to victims of terrorism overseas.

The Budget also included funding for the Defence Medical Welfare Service and the Royal Commonwealth Ex-Services League.Defence

Roads/fuel duty

AN overhaul of the system of road tax was unveiled by Mr Osborne yesterday.

The Chancellor also announced plans for a new “Roads Fund” with all the revenues from road tax to be directed to this.

He told MPs that vehicle excise duty (VED) will be transformed into three bands – zero, standard and premium – for new cars from April 2017.

The standard charge of £140 would cover 95 per cent of all cars. Revenues will be paid into the Roads Fund from 2020-21.

“That’s less than the average £166 that motorists pay today,” Mr Osborne said.

“There will be no change to VED for existing cars –

no one will pay more in tax than they do today for the car they already own.”

Dr Doug Parr, Greenpeace policy director, said the changes will mean “less incentive for the low-carbon vehicles that, ironically, the UK automotive sector is a leader in”.

Motoring groups, though, say they are pleased fuel duty will remain frozen this year.

Quentin Willson of FairFuel UK said: “Our 1.1 million supporters will be somewhat happier that whilst this tax still remains the highest in the EU, a freeze will help keep their high road transport costs somewhat lower than rumoured.”

Corporation tax

George Osborne declared Britain “open for business” as he slashed the rate of corporation tax again in a boost to more than a million firms.

He said firms already pay the lowest rate of corporation tax in the G20 group of countries after reductions have brought it down from 28 per cent in 2010 to 20 per cent, but said it will be cut again to 19 per cent in 2017 and 18 per cent in 2020.

In another boost for firms, Mr Osborne said small businesses will see their national insurance contributions (NICs) reduced from 2016 by increasing the government’s new employment allowance by 50 per cent to £3,000.

The Chancellor also said companies with annual profits of more than £20 million will see their corporation tax payment dates brought forward, “so tax is paid closer to the point at which profits are earned”.

Mr Osborne said: “This country cannot afford to stand still while others rush ahead.”

He added: “We’re giving businesses the lower taxes they can count on, to grow with confidence, invest with confidence and create jobs with confidence – a new

18 per cent rate of corporation tax.”

Living Wage

GEORGE Osborne unveiled a new £9-an-hour minimum wage saying: “Britain deserves a pay rise” in one of the flagship budget announcements from the Chancellor.

Mr Osborne said his “plan for working people” would see the statutory minimum wage rise to £7.20 in April and increase to a new “compulsory living wage” of £9 by 2020 – a policy area that is fully reserved to Westminster.

The current minimum rate is £6.50, and this was already set to rise to £6.70 in October.

Employers choose to pay the living wage, which stands at £7.85 outside London, on a voluntary basis, with the Scottish government, many councils and some public bodies signed up to the policy. In London the Living Wage is £9.15 an hour.

Mr Osborne said a compulsory living wage would mean a direct pay rise for two and a half million people and that those currently on the minimum wage would see a £5,000 wage increase by 2020.

The announcement will be seen as an attempt to seize the initiative from Labour on the issue of low pay after Tony Blair’s government introduced the UK’s first national minimum wage in 1999 at the rate of £3.60.

Labour shadow care minister Liz Kendall said the living wage increase would not make up for income working families would lose through cuts to tax credits.

Welfare

HEAVY cuts to the tax credits system were unveiled with families only receiving the handouts and universal credit payments for the first two children.

People under the age of 21 will no longer be automatically entitled to housing benefit. The benefits cap is being reduced from £26,000 to £23,000 in London and £20,000 elsewhere in the UK, although the SNP government will be able to increase this in Scotland under the Smith Commission plans.

The income threshold for tax credits is to be reduced from £6,420 to £3,850.

Working-age benefits are to be frozen for four years – including tax credits and local housing allowance, but maternity pay and disability benefits are exempted. Disability benefits will not be taxed or means-tested.

Rents in social housing sector will be reduced by 1 per cent a year south of the Border for the next four years. Higher-income households in social housing will be required to pay rents at the market rate.

One Parent Scotland voiced its “shock” at plans, from April 2017, to make single parents claiming universal credit look for work when their youngest child turns three.

It warned the required childcare infrastructure is not in place. “This announcement will spread fear among single mothers,” warned policy advisor Marion Davis.