Yesterdays’ Budget statement was a perplexing mix of measures and raft of tax changes which pleased some and angered many more. Supporters hailed the budget as ‘historic’ but Labour leader Jeremy Corbin said the budget ‘has unfairness at its very core – paid for by those who can least afford it’ and the SNP’s John Swinney warned of ‘hidden cuts’.
Despite protestations to the contrary this was most definitely a political budget – an opportunity for Channcellor George Osborne to stamp his authority and regain ground from Boris Johnson, his main rival in the fight to succeed David Cameron as the spotlight switched from Europe to the economy.
Tory backbenchers found plenty to cheer in the budget statement. Support for business, a raft of tax changes, more public expenditure cuts – and the budget was also welcomed by business leaders.
John Cridland, CBI Director-General said: “Stability and consistency are what businesses need to grow and prosper. This Budget sets the tone, providing a clear plan for fiscal health and growth.
“This Budget has some encouraging measures to help businesses create jobs for the benefit of all.
“The brighter fiscal picture has allowed the Chancellor to recalibrate his deficit reduction plans. In the next Parliament this fiscal breathing space should be used to achieve intelligent reductions in public spending, together with much-needed infrastructure and innovation.
“With business investment a crucial driver of growth, the Chancellor has signalled his intention to continue the Annual Investment Allowance. We want it to be made permanent in the Autumn Statement at £250,000 – this will fire the UK’s economic kiln by spurring smaller firms to invest in plant and machinery.
“The reduction of the headline rate of Corporation Tax to 20% next month, is a meaningful step in making the UK the most competitive tax regime in the G20 and will help to attract investment.
“The oil and gas industry, which supports 450,000 UK jobs and is a major contributor to GDP, has been given a much-needed boost with the reduction to the supplementary charge and other incentives. This will help address concerns over job losses and investment freezes, but pressures remain due to low oil prices.
“Giving savers greater freedom over their pensions, including creating a secondary annuities market, boosts choice but after a period of flux what’s needed now is breathing space for the industry and consumers to get to grips with all the changes.”
The Institute of Directors welcomed a number of measures which will help small and medium-sized businesses announced in the Budget, including relief on business rates, capital gains tax and a further cut to corporation tax. However, it raised questions about how the Chancellor intends to run a Budget surplus by 2019/20.
Simon Walker, Director General of the IoD, said: “There was plenty in the Budget for small and medium-sized businesses. They will welcome measures including more relief on business rates and cuts to capital gains tax, and a further corporation tax reduction coming in a few years. Business leaders and workers alike will be pleased with increases to the income tax personal allowance and the higher rate thresholds next year, while the introduction of a lifetime ISA will be a big boost for young people who have been put off by the inflexibility of pensions.
“The announcements of new infrastructure will be welcomed by IoD members, both in London and across the North. They key with new roads and rail links is getting spades in the ground. Businesses in Northern cities have been waiting a long time for these improvements, and cannot afford to see the protracted delays we have endured on other major infrastructure, such as airports.
“The UK faces risks on many fronts, and much heavy lifting will still be required to get rid of the deficit by the end of the Parliament. For a Chancellor who correctly prizes maths education, although he’s come up with a good answer, he hasn’t yet shown us enough of his working on how he plans to get there.”
The GMB Trade Union condemned a budget that ‘does nothing for members in the NHS and care sector’ and said it’s a failed plan from a failed Chancellor who doesn’t live in the real world.
GMB commented on the budget and responded to the Chancellor George Osborne’s warning that “storm clouds are gathering’ by laying the blame squarely at the doorstep of Number 11. After 6 years with an austerity Chancellor, there is no one else to blame, the government’s plan has failed.
GMB – who represents thousands of workers ‘who are worse off every time the Chancellor takes to the despatch box’ – condemned measures that will:
- See further annual cuts of £3.5 billion by 2020, while continuing with the crippling £22 billion of ‘efficiency savings’ in the NHS
- Completely ignores the crisis in care while continuing with the crippling £22 billion of ‘efficiency savings’ in the NHS
- Introduce yet another cut in corporation tax for the wealthiest companies at the same time as cutting support for those with disabilities, showing exactly where his priorities lie
- Force all primary and secondary schools to convert to academies by 2022, in effect outsourcing the education of our young people and removing local, democratic accountability from education.
The GMB maintains that the reality of the economy is that:
While the Chancellor loses sleep over his deficit figures, thousands of people are paying their bills on a credit card or through pay day lenders. The UK population owes a total of £1.46 trillion pounds. Most working people would love to save for a rainy day; it’s a luxury they can’t afford.
Boasts about employment figures ignore the reality of the working world – growing insecurity and the use of zero hour contracts on the rise
Our manufacturing industry still hasn’t recovered to 2008 levels and our steel industry that is being allowed to sink without a trace
Warm words on a budget for the next generation aren’t matched by fair pay for young workers – the national minimum wage increase announced in this budget don’t come close to the living wage people need to live on.
Tim Roache, GMB General Secretary, said “The Chancellor has missed so many of his own economic targets that in the real world of work he’d have been laid off long ago. It’s like setting your own test questions but still managing to fail the exam.
He tried to balance the books on the backs of working people and at the expense of our public services – it hasn’t worked, it won’t work and it’s wrong. By clinging to his failed austerity policies he’s not only making life harder for thousands of people in the here and now, he’s putting the future of UK jobs, skills and industry at risk.
“To say this was a budget for future generations is laughable when this Chancellor has presided over policies that have seen the trebling of university tuition fees and removal of maintenance grants, the scrapping of the Educational Maintenance Allowance for working class kids and an axe taken to the further education sector that we need to equip people for the changing world of work.”
And in Scotland? Again, a mixed reaction.
The Secretary of State for Scotland David Mundell said: “This is a very good Budget for Scotland – it shows that the UK Government has listened and delivered.
“We have responded to the crisis in the oil and gas industry with a major package of measures worth £1 billion to the sector. That’s on top of the £1.3billion of support previously announced in last year’s Budget and the £250 million Aberdeen City Deal. This will help protect jobs and the long-term future of the North East.
“Because of action the UK Government is taking on education and business rates in England, there will be an additional £650 million available to the Scottish Government through the Barnett formula. This, along with the power to set income tax rates and thresholds which the Scotland Bill delivers, will allow the Scottish Government to invest more in schools and hospitals in Scotland if it chooses to.
“The freeze in fuel duty and on spirit duty for Scotch whisky is good news particularly for rural Scotland – and the whisky and gin industries in particular.
“The good progress being made on both the Inverness and Edinburgh City Deals shows that we are working hard for all parts of Scotland.
“This is an historic Budget for Scotland because from next year, the Scottish Government will set income tax rates and thresholds for Scottish taxpayers. The Chancellor has given it an excellent platform from which to take up its new responsibilities.
“It is now for the Scottish parties to set out to the people of Scotland what their plans are for the new powers and what that will mean for Scottish taxpayers.”
The Scottish Government claims that the UK Budget conceals a cut of £3.5 billion in public spending across the UK, and Deputy First Minister John Swinney condemned the UK Government for pressing on with measures that will see a real-terms reduction of over £1 billion in Scotland’s budget.
Mr Swinney said the cut, buried in the detail of the Treasury budget document, has not been allocated yet to specific departments, leaving Scotland in the dark about how much will fall on public services north of the border.
The real-terms reduction in Scotland’s budget continues: even after the consequentials from today’s budget are factored in, the budget will see over a £1 billion cut by 2019-20 compared to 2015-16, and a reduction of 4.7 per cent in the day-to-day budget funding for public services.
The Deputy First Minister also warned Scotland can expect to see the increase in public sector employer pensions contributions almost certainly wipe out the consequentials Scotland will receive from 2019 as a result of today’s budget.
The UK Government’s Budget confirmed:
- a real terms reduction in the discretionary Scottish Budget in every year to 2019-20
- Scotland’s Capital budget in 2019-20 will be lower in cash terms than it was in 2010-11 – the equivalent of £550m in real terms
The measures for the oil and gas sector take on board some of the actions that the Scottish Government has been calling on for some time. Mr Swinney welcomed these but warned that more action was urgently required to address the short term challenges facing the sector.
Mr Swinney said: “The Chancellor has continued with ideologically driven austerity of choice. Scotland will see over a billion pounds real-terms cut in the day-to-day budget that pays for public services – and that is before the hidden £3.5 billion further cut to public spending across the UK is applied.
“The Scottish Government has consistently demonstrated that the UK’s deficit and debt can be brought down without the need for huge public spending cuts.
“The Budget statement today will deliver very little for Scotland – the modest consequentials that Scotland will receive are almost certainly wiped out by the increase in public sector employer pension contribution costs from 2019.
“We will continue to do everything within our power to protect the most vulnerable from the UK Government’s austerity measures – austerity of choice, not necessity – but we want to use our powers and resources to lift people out of poverty, not just continually mitigate as best we can.”
Mr Swinney continued: “This support for the oil and gas sector announced at the Budget is welcome.
“While the reduction in the headline rate will improve the long term prospects for the sector, it does not fully address the short term challenges facing the industry.
“Further clarity is now urgently required on how the commitment to consider loan guarantees and improve access to decommissioning tax relief will be able to support the sector in the short term.”
The Chancellor George Osborne announced a City Region Deal for Edinburgh and South East Scotland, saying that he would open negotiations on a city deal with the region – a move that has been welcomed by local leaders.
The Edinburgh and South East Scotland City Region Deal – comprising the City of Edinburgh, East Lothian, Fife, Midlothian, Scottish Borders and West Lothian Councils – would follow other City Deals in Manchester, West Midlands and Merseyside.
Speaking on behalf of the Edinburgh and South East Scotland City Region, City of Edinburgh Council Leader Andrew Burns said: ‘‘We are delighted with the Chancellor’s pledge to develop a City Deal for our region and welcome the opportunity to continue our engagement with both the UK and Scottish Governments.
“We submitted our proposals in September 2015 and remain as determined as ever to negotiate greater fiscal powers and funding towards strategic housing, transport and infrastructure to help the region to become the most connected, creative, inclusive and innovative place in Europe.
“This commitment from Westminster is a step forward for our proposals to tackle inequality and accelerate substantial economic growth.”
How will the budget affect you? Consumer organisation Which? has created a useful budget hub to help you find out more about the key announcements and how they affect consumers.
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