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Budget 2016 summary

Friday, 18th March 2016

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Author: Tony Ryan

George Osborne delivered his eighth Budget as Chancellor on Wednesday 16th March. Here are the key points at a glance

Health and education

  • A new sugar tax on the soft drinks industry to be introduced in two years’ time, raising £520m a year to be spent on doubling funding for primary school sport in England
  • Levy to be calculated on levels of sugar in sweetened drinks produced and imported, based on two bands
  • Pure fruit juice and milk-based drinks to be excluded and small supplies will be exempt
  • Secondary schools in England to bid for £285m in new funding for extra after-school activities like sport and art
  • Plan for all schools in England to become academies by 2022
  • Compulsory maths lessons until 18 to be looked at
  • £500m to ensure “fair funding” formula for schools in England
  • Libor funds to be spent on children’s hospital services, specifically in Manchester, Sheffield, Birmingham and Southampton

The state of the economy

  • Growth forecasts revised down markedly for next five years
  • Growth forecast to be 2% in 2016, down from 2.4% in November’s Autumn Statement
  • GDP predicted to grow 2.2% and 2.1% in 2017 and 2018, down from 2.4% and 2.5% forecast four months ago
  • Outlook for global economy is “materially weaker” and UK “not immune” to slowdown elsewhere
  • The UK still forecast to grow faster than any other major Western economy
  • A million jobs forecast to be created by 2020
  • Inflation forecast to be 0.7% for 2016, rising to 1.6% next year

Public borrowing/deficit/spending

  • Further cuts of £3.5bn by 2020, with spending as a share of GDP set to fall to 36.9%
  • Debt targets to be missed. Forecast debt as a share of GDP revised up in each of the next five years to 82.6% in 2016-17 and 81.3%, 79.9%, 77.2% and 74.7% in subsequent years
  • Debt to be £9bn lower in 2015-16 in cash terms
  • Annual borrowing in 2015-6 forecast to be £72.2bn, £1.3bn lower than forecast in November
  • Public finances still projected to achieve a £10.4bn surplus in 2019-2020
  • But borrowing forecasts revised up to £55.5bn (+£5.6bn), £38.8bn (+£14bn) and £21.4bn (+16.8bn) in 2016-7, 2017-8 and 2018-9 respectively
  • The deficit as a share of GDP is projected to fall to 2.9% in 2016-17, 1.9% in 2017-18 and 1% in 2018-19

Personal taxation

  • The threshold at which people pay 40% income tax will rise from £42,385 now to £45,000 in April 2017. Will only apply to Scotland if adopted by Scottish government
  • Tax-free personal allowance, the point at which people pay income tax, to rise from £11,000 in April 2016 to £11,500 in April 2017
  • Capital Gains Tax to be cut from 28% to 20%, and from 18% to 10% for basic-rate taxpayers
  • Insurance premium tax to rise from 9.5% to 10%
  • Class 2 National Insurance contributions abolished, which the government says gives a tax cut of more than £130 to three million self-employed workers from 2018

Alcohol, tobacco, gambling and fuel

  • Fuel duty to be frozen at 57.95p per litre for sixth year in a row
  • Beer, cider, and spirits duties to be frozen
  • Inflation rise in duties on wine and other alcohol
  • Excise duties on tobacco to rise by 2% above inflation

Pensions and savings

  • Annual Isa limit to rise from £15,240 to £20,000
  • New “lifetime” Isa for the under-40s, with government putting in £1 for every £4 saved
  • People who save a maximum of £4,000 towards a home deposit or retirement will get a £1,000 top-up from the state every year until they turn 50
  • New state-backed savings scheme for low-paid workers, worth up to £1,200 over four years
  • The Money Advice Service, which has provided financial advice to consumers since 2010, is to be abolished

Business

  • Headline rate of corporation tax - currently 20% - to fall to 17% by 2020
  • Annual threshold for 100% relief on business rates for small firms to rise from £6,000 to £12,000 and the higher rate from £18,000 to £51,000, exempting 600,000 firms
  • Supplementary charge for oil and gas producers to be halved from 20% to 10%
  • Debt interest payments used by larger firms to cut corporation tax bills will be capped at 30% of earnings.
  • Petroleum revenue tax to be “effectively abolished”
  • Anti-tax avoidance and evasion measures to raise £12bn by 2020
  • Use of “personal service companies” by public sector employees to reduce tax liabilities to end
  • Crackdown on foreign firms selling products online in UK without paying VAT
  • Commercial stamp duty 0% rate on purchases up to £150,000, 2% on next £100,000 and 5% top rate above £250,000. New 2% rate for high-value leases with net present value above £5m. Effective from midnight

Housing/infrastructure/transport/regions/energy/culture

  • Powers over criminal justice to be devolved to Greater Manchester and Greater London Assembly to retain business rates
  • New rail lines to get green light, including Crossrail 2 in London and the HS3 link between Manchester and Leeds
  • More than £230m earmarked for road improvements in the north of England, including upgrades to M62
  • £700m for flood defences schemes, including projects in York, Leeds, Calder Valley, Carlisle and across Cumbria
  • Tolls on Severn River crossings between England and Wales to be halved by 2018
  • £115m to tackle rough sleeping and homelessness, funding 2,000 places
  • In Scotland, Libor bank fines to pay for community facilities in Helensburgh and for naval personnel at Faslane
  • New elected mayors for cities and towns in southern England
  • New tax relief for museums to boost temporary and touring exhibitions
  • New Shakespeare for the North theatre in Knowsley, Merseyside