Quote of the Day:
“Another bad thing about ‘prosperity’ is that you can’t jingle any money without being under suspicion”
Kin Hubbard, American Humourist & Writer (1868-1930)
After a particularly pointless PMQs which consisted of Ed Miliband popping up like a Punch & Judy puppet to ask about broken Tory promises every five minutes and David Cameron getting confused about the pronunciation of sado-masochism, Osborne finally stood up to tell us all of the things he had already announced earlier this week. Not forgetting of course to blame the recession entirely on the Labour Government, although with warning lights flashing over the global economy any future recession would be nothing to do with the government at home, clearly.
You can always tell when the cupboard is bare when politicians resort to naming policy proposals rather than delivering policy proposals – Northern Powerhouse, Rates Review, All in it Together, Aspirational Statement (fairly sure that one has been rolled out before). Indeed, so much had been leaked that we were all practically asleep by the time he pulled his Stamp Duty rabbit out of his hat. Earlier this week a new road building plan was announced along with investment in flood defences. Yesterday we had the announcement of a new Garden Village at Bicester, or, for those in the industry, an old Eco Town repackaged in coalition vernacular.
Osborne was careful to steer away from talking about the ‘deserving poor’, apparently it is a Statement for those who want to work hard and get on, because that obviously sounds so much better. On that note, Universal Credit work allowances frozen for a year, no benefits to migrants without work, working age benefits frozen for two years. But, there will be a £2,000 carers allowance introduced.
One thing is clear, despite his Scrooge-like appearance, Osborne must give out the most marvellously wrapped Christmas presents as he excels at packaging and repackaging the same thing to make it look so much better than it really is.
For the prologue, Osborne went into some detail about the facts and figures on the economy (very quickly and hotly disputed by Ed Balls when he stood up to speak almost an hour later). Growth is predicted at 3% this year and steadily slowing to 2.3% by 2020 – not exactly the best forecast. Spending plans for 2015-16 will reduce spending by over £13bn.
Borrowing is allegedly lower than predicted in the Budget – but this is due to the ONS revising the way in which the figures are measured – even Osborne couldn’t resist a smile at that one, the timing couldn’t have been better. Apparently there will be a surplus of £4bn by 2019, but we’ve heard this so many times from every government over decades that it seems like rather a pointless statement. Again, disputed by Ed Balls who had in his hand a piece of paper which apparently states figures from the OBR statin that borrowing has actually gone up. Smoke and mirrors.
Apparently employment is at a record high with 500,000 new jobs created over the last year– although this does neatly ignore that wages are at record low in terms of keeping up with inflation and have been for some time. So people may be in work but they are still getting poorer.
In a plea to would-be UKIP voters, Osborne delighted to announce the payments to EU will fall in real terms over the next 5 years – apparently all down to Cameron fighting hard for the UK and nothing to do with more repackaging of figures.
Apparently business really does matter and especially small business. However, the measures to help small business continued to be a tinkering around the ages – doubling of small business rate relief, which is positive. Yet the promise of an overhaul of the business rates system with a review due to report in some vague time in the future (Budget 2016) certainly way past an election, is not exactly lighting the fire of new and growing companies across the country.
More for small business there is a plan to expand the British Business Bank with an extra £400m. The Government will also support peer-to-peer lending by providing information on alternative forms of finance as well as increasing RND tax credits for SMEs to 230%. The Chancellor will also extend funding for lending for another year and focused exclusively on small firms.
Similarly with employment, many businesses will welcome the abolition on National Insurance on apprentices under 25 but for the many businesses who cannot or do not use apprentices there is very little to welcome.
Yet again, no government seems prepared to cut the rate of Corporation Tax for small businesses – presumably because they need the money from them to make up for the massive tax avoidance from big business. Perhaps one we get all of these windfalls from the tech sector, small business may be given more of a chance…
A mention towards devolution which is likely to lead to English Votes for English Laws and the establishment of a Northern Powerhouse to be funded by a form of ‘Sovereign Wealth Fund’. Osborne also opened the door to more regional Mayors, Manchester have already indicated their keenness but this may not inspire other regions just yet. As part of this, the government is to provide £1m to fund a Great Exhibition in the north celebrating art, culture and design.
On the energy front, the small print shows investment going into shale gas exploration and off gas grid heating systems as well as the potential financing of a new nuclear plant at Moorside and progressing discussions on the Swansea Bay Tidal Lagoon.
On housing and planning, a new review will look at how local authorities can use fiscal measures to deliver more affordable housing and Housing Associations will be assessed as part of a review to look at capacity to increase borrowing. In addition, new targets will be set for the release of public sector land for housing.
On planning, somewhat cryptically, the Government will apparently take forward measures to ensure that the principle of development need only be established once… Whether that relates to multiple applications for the same site or the evolution of local plans, both or something entirely different is unclear.
The Government is also discussing a potential Croydon Growth Zone subject to a value for money assessment.
Stamping all over the Place
The biggest surprise undoubtedly comes from stamp duty with a massive overhaul due to take place by midnight tonight – nothing like taking time to get systems in place before policy is pushed through. Governments do like extremes – either setting up reviews which take longer than a tortoise does to run a marathon, or pushing through policy within a few hours.
SDLT is currently charged at slab rate on the whole cost of a home. The plan is to abolish the residential slab system so that higher rates will only apply to the property price above the band. This means that Stamp Duty will be cut for 98% of homeowners.
Only those with homes over £937,000 will pay more with 12% on homes over £1.5m, up from 7%. Taking effect from midnight tonight – this is likely to prove hugely popular with the many people in the middle of moving house, even those likely to be worse off will prefer this to the proposed Labour Mansion Tax so it could well be a key vote winner; if only there was a General Election coming up…
Stealing from the Rich…
Onto tax avoidance and to one of the big announcements of the day. Osborne announced a plan to crack down on those large companies (not mentioning any names), particularly those in the tech sector (well, you may mention names but I couldn’t possibly comment) by introducing a 25% tax on profits made in the UK.
Those nameless companies will be fuming in their group huddle corners, but it is likely to be possible amongst the plebs, sorry, I mean ordinary voters, who said plebs? However, there is a distinct possibility that this approach may contravene EU law so this could be a measure which gets stuck in the Courts for some time to come.
Banks will also be hit by a new rule established limiting the amount of profit which can be offset against losses carried forward to 50%. This will put around £4bn into the economy – and presumably take it out of the pockets of individual bankers by reducing the bonus pool. Not that Osborne said that, but it is a fairly handy way to kill two birds with one stone. Obviously that assumes that those working in institutions which create tax efficient investment structures won’t find any way to make this profit miraculously disappear.
For those high net worth individuals, particularly those who invest in dubious tax avoidance schemes (and again, not mentioning any names) but they can Take That and put it in their pipe and smoke it. They will certainly have to Jimmy Carr-ful from now on as the Chancellor cracks down on tax avoidance on stamp duty, special purpose vehicles etc.
Giving to the (deserving) Poor…
Osborne has managed to find an extra £2bn every year, starting from April 2015, to go directly to the NHS plus £1.2bn windfall investment into GP services coming from banking fines.
The personal tax allowance to rise to £10,600 taking 3.5 million out of tax altogether – because the Conservatives don’t sneer at people who want to work hard, Osborne just wanted to ‘flag’ that up. Yes, the Emily Thornberry joke is still going. In the Bullingdon Club they were known for not looking down on the working class, except when the working class were cleaning their shoes.
Inheritance Tax Exemption is to be extended to aid workers who lose their lives in the line of duty and on savings, the 55% death tax for unused pension pots will be abolished, pensions can be passed on tax-free. ISA limit to be increased to £15,240 and can now be inherited with the tax-free status.
VAT will also be refunded to hospice charities, air ambulance and search & rescue facilities. Another populist move – which is not to suggest it isn’t positive, it clearly is.
To the delight of parents everywhere the Chancellor announced the abolition of Air Passenger Duty for children under 12 from May 2015 and for children under 16 from 2016. Clearly, this will enable those parents who prefer to take their children on holiday in term time to pay the fines charged to them by schools, offsetting this against the now abolishing APD. Everyone is happy! Including the airlines who have seen their stocks rise this afternoon on the back of the announcement.
Having just received the detailed documentation, there will no doubt be elements that we have missed but so ends your snapshot overview.