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The Office for Budget Responsibility may have revised their growth figures for 2014 from 2.4 per cent to 2.7 per cent, but the slowing rate of growth expected post-2015 demonstrates that this ‘good news’ budget will not include the litany of giveaways that one might expect as we approach the election. Instead the Chancellor will reinforce his message that a ‘slow and steady’ recovery is on track, but will take further work to secure. Indeed some commentators have gone as far as to say this will be the ‘Boring Budget’.
Holding out against critics, even those in his own party, George Osborne is shaping this year’s budget around living standards and those on lower and middle incomes, choosing to focus on providing affordable housing and raising the basic rate tax threshold, again. His decision to extend Help to Buy until 2020 and the expected raise of the basic-rate tax threshold to £10,500, which will remove more low earners from having to pay any income tax, demonstrates his commitment to delivering for those socio-economic groups. The announcement today of tax breaks of up to £2,000 per child for working parents is further evidence of the Coalition’s drive on living standards. The Chancellor will strive to balance the ‘good news’ with a clear articulation of the risks associated with subjecting a recovering economy to Labour control.
His speech is also expected to focus on measures that will boost investment and encourage exports, framing individual policy announcements against the backdrop of calls from business for a jobs and growth package. First time buyers, house builders, and the wider construction sector look set to gain most from this year’s budget thanks to the extension of the Help-to-Buy scheme which should facilitate the building of a further 120,000 affordable homes.
Responding to the CBI’s call for relief from the ‘green taxes’ perceived as disadvantaging UK companies, Osborne is expected to announce a carbon price floor (CPF) freeze. In a move to further encourage business to invest, the Chancellor is predicted to extend the current annual investment allowance (AIA), which dictates how much new capital expenditure companies can offset against tax, with a higher allowance encouraging firms to increase capital investment.
The Shadow Chancellor has responded to George Osborne’s pre-budget announcements by calling for restrictions on the Help to Buy scheme and arguing for an emergency ‘help to build’ scheme to create more new and affordable homes by the end of this year. Balls has also pledged that a future Labour government would scrap the marriage tax break, and criticised Osborne for not reintroducing the 50p tax rate which the Labour party are committed to at least in the short term.
In general, whilst there maybe a few golden nuggets announced in the Chancellor’s speech tomorrow, we are waiting on juicier “election tickets” for the Autumn Statement. More information can be found in our briefing here and should you require any follow up information, please don’t hesitate to contact us.