Budget 2013: How did you fare?
DELIVERING a Budget to help hard-pressed families was one of George Osborne’s key aims yesterday, as the economic outlook for the coming year remains bleak.
A further cap in public sector pay was met with anger, but measures were included to ease the burden of childcare and a planned rise in the cost of petrol was axed.
A planned 3p rise in beer duty tax was also scrapped and replaced by a 1p cut on the cost of a pint.
And a rise in the personal allowance – meaning no income tax is paid by anyone on the first £10,000 of their earnings – was brought forward a year to 2014.
A new employment allowance, which will take the first £2,000 off employer national insurance bills for every company in the country was described by the Chancellor as “taking tax off jobs”.
He insisted his package was a “Budget for people who aspire to work hard and get on”.
On energy, there was a boost for the controversial shale gas industry, which collects sub-ground methane using a controversial process known as fracking. Mr Osborne said the “generous new tax regime” would include a shale gas field allowance. He said: “Shale gas is part of the future. And we will make it happen.”
The decision to raise the level of the personal allowance before tax kicks in will mean 2.7 million working age adults are taken out of income tax altogether. The basic and higher rates of income tax will remain the same and the government has stuck by its decision to reduce the top rate of tax on earnings over £150,000 from 50p to 45p next month.
Aspiring homeowners are also to receive help through loans to be made available to those who can find a 5 per cent deposit, with the loan worth up to 20 per cent of the value of a property worth up to £600,000 and repayable when it is sold.
“The deposits demanded for a mortgage these days put home ownership beyond the great majority, who can’t turn to their parents for a contribution,” Mr Osborne said.
A proposed rise in fuel duty this autumn would have put an extra 3p a litre on to the already-high price of petrol and diesel at the pumps. Mr Osborne’s announcement that the increase has been scrapped, which had been widely expected, was welcomed by motoring groups.
But the decision to cap public sector pay increases at an average of 1 per cent in 2015-16 came under fire from trades unions.
Trades Union Congress general secretary Frances O’Grady said: “Family budgets are at breaking point and millions of nurses, teachers, firefighters, council workers and civil servants will have been hoping the Chancellor might ease their pain, not add significantly to it.
“Public sector workers have seen their pay frozen as the cost of living soars and thousands now find themselves earning less than the living wage.”
The introduction of the single tier state pension of £144 a week a year early in 2016 will run alongside the rollout of the government’s landmark automatic enrolment into workplace pensions.
The reforms spell an end to “contracting out” of occupational pension schemes, which saw employees and employers on final salary pensions opt out of the second state pension, instead paying their money into their pension scheme while making reduced national insurance contributions.
Ed Wilson, of PwC’s pensions team, said: “The reforms mean the end of contracting-out, meaning employers who sponsor these types of defined benefit schemes, and employees in these arrangements, will face an increase in national insurance costs.”
Hard-pressed motorists received some good news when the fuel-duty increase planned for autumn 2013 was axed.
The rise would have put about 3p a litre on to the already high price of petrol and diesel at the pumps. Mr Osborne’s announcement, which had been widely expected, was welcomed by motoring groups.
AA president Edmund King said; “A September fuel duty hike would have been the last straw likely to break UK drivers’ budgets and would have led to a summer of discontent.”
But FairFuelUK spokesman Quentin Willson said it does not provide any “immediate relief” from climbing fuel prices. “The government needs to cut duty substantially to get the economic growth we all need,” he said.
The Chancellor brought some cheer to beer drinkers by scrapping a duty escalator – and going further with a 1p cut in the price of a pint.
The beer industry and campaign groups had warned that the escalator, which has added 2 per cent to the price of a pint since it was introduced by Labour in 2008, was forcing pubs out of business.
The Campaign for Real Ale gathered more than 100,000 names on a petition to spark a parliamentary debate last year. The petition said beer duty has risen 42 per cent since 2008, with 18 pubs a week closing. Mr Osborne said 10,000 pubs closed in the past decade. But duty on spirits will not be cut, prompting anger among whisky industry leaders.
Thousands more people will be eligible for the new simple flat-rate state pension after the government brought the start date forward to April 2016.
By starting the single-tier pension a year earlier than planned, some 400,000 more people will qualify for the pension.
This includes about 85,000 women who would have missed out, unlike men of the same age, because their state pension age was rising at the same time as the reform was being introduced. However, pension fund bodies raised concerns that firms may be placed under too much time pressure to adapt to pension reforms, which could prompt a fresh round of final salary scheme closures.
The single-tier pension, which will be about £144 a week, will run alongside the government’s “automatic enrolment into workplace pensions” reforms to encourage more people to save for retirement.
A further cap on public-sector pay was among the less popular announcements, prompting claims that millions of families have been forced into another year of “severely squeezed incomes”.
The Chancellor said wage rises would be limited to an average of up to 1 per cent in 2015-16, extending the clampdown by a further year. The cap will apply to the wages of health staff and civil servants, limiting their pay rises beyond the next general election.
Mr Osborne also announced that he plans to seek “significant” savings through reforming the system of annual rises through pay progression, which he said was difficult to justify given that millions of workers had seen their wages frozen or cut. In the trade-off between pay and jobs, Mr Osborne said jobs had to come first.
Tax-free childcare vouchers will be introduced in an effort to help parents with the soaring cost of nursery care. The vouchers will be worth £1,200 per child and there will be increased support for families on universal credit.
It is estimated the scheme could benefit about 2.5 million families with children under 12 from 2015. That is more than the current employer-supported childcare voucher scheme, which is provided by only about 5 per cent of employers. Nursery bills have risen 77 per cent in real terms in the past decade, with the average cost of a full-time place now £11,000.
Workers will not pay any tax on the first £10,000 of their wages from next year – 12 months earlier than planned.
Bringing forward the increase in the income tax personal allowance will mean a cumulative cash benefit for typical basic rate taxpayers of £705 since the coalition took power, according to Treasury figures. From April, the allowance will go up as planned to £9,440 – a £200 boost for 24 million taxpayers, George Osborne said.
The basic and higher rates of income tax will remain the same and the government has stuck by its decision to reduce the top rate of tax on earnings over £150,000 from 50p to 45p next month.
A help-to-buy scheme for those struggling to find mortgage deposits was unveiled to breathe life into the ailing housing and construction sectors.
It will include £3.5 billion for shared equity loans, with a government interest-free loan worth 20 per cent of the value of a new-build house. The scheme will be available next year. A new mortgage guarantee, sufficient to support £130bn of loans, will help people who cannot afford a big deposit.
The government will also offer interest-free loans for five years for those wanting new-builds. The loans will be available to those who can find a 5 per cent deposit, with the loan worth up to 20 per cent of the value of a home worth up to £600,000.
Fracking controversially won backing from the government and a Scottish power station is among the bidders for a pioneering £1 billion carbon-capture project.
The Chancellor promised a generous new tax regime for shale-gas extraction. He insisted it was “part of the future” as he unveiled measures to support the new industry, including field allowances to promote early investment in the sector.
Fracking involves drilling deep into the ground, and injecting liquids at high pressure to displace gas contained in porous shales.
Supporters say shale-gas production could provide a cheap, secure source of energy, but opponents are worried fracking could cause earthquakes and pollute water supplies.
Meanwhile, the Peterhead gas-fired power station, along with Drax in North Yorkshire, have been named as the two preferred bidders in the £1bn competition to encourage the development of carbon capture and storage technology. At Peterhead, Shell and SSE are behind the plans. CO2 would be transported to Shell’s Goldeneye field in the North Sea using, as far as possible, existing pipelines.
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Wednesday 22 May 2013
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