Well that wasn’t as awful as the BBC was trailing it to be. The public finances will take a year longer to meet the ambitious targets set in May 2010. Further huge spending cuts seem to have been avoided and there’s even some good news on taxation.
The good bits for me:
- the personal allowance is continuing to rise
- crucially for “middle class” income tax payers, the point at which the 40% rate starts is creeping up again after several years of being cut
- which might mean I get a slight tax cut
- corporation tax is cut so hopefully Britain might start to benefit from instead of being challenged by international company profit mobility
My expectation that current spending would be cut and the savings used to increase capital spending seems to be correct, although I would prefer much larger cuts in state pension commitments and some of the housing entitlements* in return for much larger increases in infrastructure investment.
The Tube is to get a decent dollop of cash in order to extend the Northern Line through Battersea. The proposal on the table isn’t perfect (I would like it to join up with the Vauxhall stations and continue to another major interchange, perhaps Earls Court) but any Tube extensions to current transport deserts are a big plus.
More money for school buildings. The Gove-rnment has been accused of reducing the money available to good existing schools for expansion in order to spend on new free schools. We need both. It now looks like we might get both.
The key thing is the aim to get public spending down to below 40% of GDP. I read somewhere that the British government has never managed to raise more than 38% of GDP in taxes, even in the dark fortress-economy 1970s.
The less good bit:
The inevitable long-term shift from taxing incomes and profits to taxing land and consumption has stalled. I wasn’t expecting VAT to go up but I thought there might be an announcement of a review into Council Tax. This seems to have been kicked into the long grass, which is perhaps not surprising given the Tories’ record on property tax reform. Maybe this is George’s electoral strategy: to let the LDs commit suicide by proposing a major reform of property taxation at the next election…
So overall, I reckon Osborne has done just about the best he can, given the awful mess that the UK and indeed the whole world is in.
* I recently discovered that it is possible to rent a flat in my block for £6 a week if you know your way around the welfare system
The possible shift on fracking was good too.
Yes good point!
Yes, the budget doesn’t seem to have been as bad as expected.
The cut in the lifetime limit on pension contribution is the worst bit for me. The government should be promoting pension saving so that we don’t rely on the state.
As someone who will never get close to the limit I’m not sure I can get excited about it! I think tax breaks for very high earners are difficult to justify in the current climate. You can always put your excess savings into another tax-free investment, say a house?
Although a pension pot of 1.25m sounds like a big amount of money if you save for your whole working life with compound interest it could be quite reasonably reached. You’d only have to be on a bit more than the average wage to get there.
A pension pot of 1.25m only buys a pension of 27k per year inflation protected (it would be even lower if you had spouse guaranteed income etc…) so it isn’t really something for the super rich.
ISAs and Premium Bonds are the only other real tax free investments. ISAs have quite a low limit too. I don’t really think your home is really an investment. How can you save more each year?
(I got the pension quote from the Legal and General site.)
I stand corrected, I assumed it was a maximum amount put in, rather than a maximum total size. That said, £27k a year would be fine if you had paid off your mortgage and only needed the money for food, heating and holidays!