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The budget

2011budget_homepage_graphic1The Chancellor delivered a budget today that would have pleased at least one person, Lynton Crosby. Who he? Well, he’s the Conservative election strategist. For this budget has been crafted with skill to ensure victory in the 2015 general election.

Despite the event being about economic management it would be a very strange Chancellor that didn’t also have some populist measures in the package that would ensure tabloid headlines.

It doesn’t take much of a gift of prophecy to suggest that the tabloids will have headlines on cheaper booze, bingo and of course potholes. All of which have benefitted from the Chancellors largess.

The Chancellor clearly wanted to shore up his credentials as a future leader of his party, by appealing to his own backbenchers. Forget climate change and all that “green crap” advocated by those Liberal Democrats. Forget environmental targets he capped Carbon Price Support at £18 per ton of CO2 for a ten year period. Lovely, say the climate change deniers on his backbench.

Of course, there wouldn’t be many welfare recipients that would vote for his party, so they can be safely hit.  After all this group has already been demonized by the tabloids and so no votes there.  Capping the  welfare benefit bill at £119 billion will be popular, but it will certainly hurt many of the poorest people in society.

Not so pensioners, at least the better off ones. They are more likely to vote for the Chancellors party and for this group he has more than excelled.

Many pensioners have been frustrated with the lack of flexibility they have with money in their pension pot and how small their annuities are. The liberalizing measures announced will make a real difference.  Pensioner Bonds and raising the ISA levels will be welcomed by this group.  Not a bad headline to be called the “pensioners friend” before 2015.

Here are some of the most important announcements.

Taxation

Level of paying income tax will be raised to £10,500

 

Bingo duty reduced from 20% to 10%

 

Threshold for 40p income tax to rise from £41,450 to £41,865 next month and by a further 1% to £42,285 next year

 

Inheritance tax waived for members of emergency services who put their lives on the line in their jobs

 

Tax on homes owned through a company to be extended from residential properties worth more than £2m to those worth more than £500,000

 

All long-haul flights to carry lower rate of air duty.

 

Savings

 

Cash and shares Isas to be merged into single New Isa with annual tax-free savings limit of £15,000 from 1 July

 

The 10p tax rate for savers abolished

 

Amount of Premium Bonds you can hold will o be lifted from £30,000 to £40,000 in June and £50,000 next year and number of million pound winners doubled

 

Pensions

 

Tax restrictions on pensioners’ access to their pension pots to be remove and no to buy an annuity

 

Taxable part of pension pot taken as cash on retirement to be charged at normal income tax rate, down from 55%

 

Increase in total pension savings people can take as a lump sum to £30,000

 

A new Pensioner Bond will be introduced paying “market-leading” rates, available from January to over-65s, with possible rates of 2.8% for one-year bond and 4% for three-year bond.

 

Fuel, Alcohol and Tobacco

 

Beer duty cut by 1p a pint, duty on ordinary cider will be frozen as it will on whiskey and spirits.

 

Fuel duty rise planned for September will not happen

 

Tobacco duty to rise by 2% above inflation

 

State of the economy

Growth of GDP forecast to be up by 2.7% this year and 2.3% next year, then by 2.6% in 2016 and 2017 and by 2.5% in 2018

 

Coinage

Twelve-sided £1 coin to be introduced in 2017

 

Welfare cap

Budget to be capped at £119bn for 2015-16, rising in line with inflation to £127bn in 2018-19

 

Public borrowing/deficit

 

Deficit forecast to be 6.6% of GDP this year, 5.5% in 2014-15 then falling to 0.8% by 2017-18 with a surplus of 0.2% in 2018-19

 

Borrowing forecast to be £108bn this year and £95bn next year, leading to a surplus of almost £5bn in 2018-19

 

Permanent £1bn reduction in government department overspends

 

Business

Lending for exporters doubled to £3bn and interest rates on that lending cut by a third

 

Wales

As a consequence of the budget spend in England the Welsh government should receive an extra £36m to spend over the next two years, a little over 0.1% of its £15bn annual total budget.

The budget clearly was good news for business, the Chancellor has given them almost everything that they could have hoped for. It clearly helps the more affluent pensioner. The real losers are the poor and those in low paid jobs. The gap between rich and poor will continue to grow. And as for Wales it was announced that tomorrow will see the Bill giving the recommendations on tax and borrowing from the Silk Commission placed before the Commons. The Chancellor hoped that as a consequence  the M4 relief road improvements would go ahead.

 

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One Response to “The budget”

  1. Karen says:

    Clearly the best budget of the last thirty years. It helps everyone. Those that work. Those that don’t. Those that save. Those that educate and train. Those that invest. Those that take risks. And those that have paid taxes for a lifetime.

    The real losers are the poor and the low paid. But being poor in today’s Britain is simply a lifestyle choice. And as for the low paid, well, this only relates to the immigrant workforce that so many seem so desperate to be rid of.

    All in all, a good day for common sense.

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