Budget 2013 key points: beer duty rise scrapped and help for home-owners
THE rise in fuel and beer duty has been scrapped and the personal tax allowance will be raised a year ahead of schedule, the Chancellor George Osborne has announced.
In a Budget speech frequently interrupted by rowdy MPs, Mr Osborne vowed to help an “aspiration nation” and “build a modern reformed state that we can afford”.
“I want to send a message to anyone who wants to invest here, to create jobs – Britain is open for business,” he said.
Drama unfolded outside the House as well as within – the London Evening Standard splashed embargoed details of the Chancellor's budget speech and tweeted a picture before he had taken to his feet.
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The Standard's political editor Joe Murphy issued a Twitter apology for the "very serious mistake” and it is understood a journalist has been immediately suspended while the paper carries out an internal investigation.
Meanwhile Labour leader Ed Miliband slammed the Budget and called Mr Osborne "a downgraded Chancellor".
Here we round-up the main announcements of the 2013 Budget:
The limit at which people start paying tax is to be raised to £10,000 in 2014 - a year earlier than planned.
This is “a historic achievement for this government”, Mr Osborne said.
Raising the income tax threshold will mean means £700 less paid by working families, he said.
The annual above-inflation rise in beer duty will be scrapped and beer duty will be cut by one per cent later this month.
All other alcohol duties will rise by two per cent above inflation, however.
“It helps a little to have bills which aren’t going up”, Mr Osborne said.
Mike Benner, CAMRA Chief Executive said: “This is a momentous day for Britain's beer drinkers, who will tonight be raising a glass to the Chancellor for axing this damaging tax escalator and helping keep pub-going affordable for hard-pressed consumers.
“This decision will keep the lid on the cost of a pint down the pub.”
September's fuel duty rise was scrapped and petrol will be 13p a litre cheaper than if he had not frozen the duty over the past two years, the Chancellor said.
This means £7 for every time drivers of a Vauxhall Astra or Ford Focus fill up, he said.
Some 600,000 more jobs are expected this year than at the same time last year, and the claimant count will fall by 60,000, Mr Osborne said.
National Insurance (NI)
Every company in the UK is to get the first £2,000 taken off their NI bill in an attempt to boost job creation.
This is “the largest tax cut in the Budget”, the Chancellor said.
He said when the change starts next April, "one third of all employers" will not have to make any NI payments.
The Chancellor said the difficulties would-be home-owners face getting on the housing ladder is a “set-back to social mobility”. He went on to unveil plans to help them.
The 'Help to Buy' scheme improves on a previous scheme known as FirstBuy. It enables buyers to put down a five per cent deposit on a new home.
Up to 20 per cent of the cost of the home is funded by a "shared equity" loan, which will be repayable when the home is sold. That loan will be interest-free for the first five years.
The remainder is paid for with a standard mortgage.
Whereas the previous scheme was only open to first-time buyers, this one will be available to all buyers. Previously there was also an income limit of £60,000 a year, but this will no longer apply.
It will cover homes up to the value of £600,000.
Mr Osborne also announced a new mortgage guarantee to underpin £130bn of new mortgage lending for three years from 2014. This will apply to any home, new or old.
In short, loans from High Street lenders would be underwritten by the Government, and if a borrower defaults on a mortgage, the Government will step in to compensate the lender.
Mr Osborne confirmed the introduction of 20 per cent tax relief on childcare vouchers up to £6,000 per child from 2015.
Under government plans parents will be able to use an online voucher system, which will mean up to a fifth of childcare costs are paid for by the state. This will be up to a value of £1,200 per year per child.
Initially parents of children under the age of five will benefit but this will rise over time to cover households with children under the age of 12.
Households where both parents work will qualify, but those where one stays at home to focus on childcare will not. Single parents must also be working to get the help.
The Chancellor also confirmed the flat-rate pension £144 a week will be brought forward to 2016, and there will be a cap on social care costs.
The first grim announcement came when the Chancellor confirmed the growth forecast has been lowered to 0.6 per cent this year - downgraded from 1.2 per cent in December.
The Chancellor announced borrowing of £114bn this year, set to fall to £108bn, £97bn and £87bn in the following years.
The deficit has been cut by a third since May 2010, Mr Osborne said.
Borrowing as share of GDP is to fall from 7.4 per cent in 2013-14 to five per cent in 2015-16.
Debt as a share of GDP is to increase from 75.9 per cent in 2012-13 to 85.1 per cent in 2015-16. But he says it will fall to 84.8 per cent by 2017-18.
The two per cent Bank of England target will remain in place, Mr Osborne said.
Mr Osborne said the one per cent cap on public sector pay will be extended to 2015-16 and there will be limits on "progression" pay rises in the sector.
The military will be exempt from "progression" pay limits, however, “to recognise their work”.
Cuts and investment
Most government departments will see budgets cut by one per cent in each of the next two years, the Chancellor said, but schools and the NHS will be protected.
He also pledged £3bn extra for new projects every year from 2015-16 until 2020 – a total of £15bn.
The Corporation Tax rate will be reduced to 20 per cent from April 2015, the Chancellor announced.
Corporation tax – cut from 28 per cent to 21 per cent - will be “the lowest business tax of any major economy in the world”, he said.
Mr Osborne also announced tax relief for investment in social enterprises and tax incentives for ultra low-emission cars.
The Government will tackle tax avoidance to “bring in £1bn of unpaid taxes”, Mr Osborne said.
General Anti Abuse Rules will be implemented and tax avoiders named and shamed.
On tax avoidance measures, Chas Roy-Chowdhury, ACCA head of taxation, says: “While it is no surprise the Chancellor went after the tax avoidance hare, he will always be treading a fine line between collecting tax and denting the UK’s appeal as a business-friendly economy – an essential requirement for our recovery.
“A tougher looking tax avoidance regime might look good to the public, but while the Chancellor has been making noises about a global effort to crackdown on tax avoidance, unilateral measures such as GAAR risk diverting businesses currently in or looking to move to the UK into the arms of other markets.
"The question will be whether his other business-friendly tax initiatives, such as the patent box and newly announced lower corporation tax rate will help the UK remain appealing. Some evidence would suggest the rot is already setting in.”