Today Chancellor of the Exchequer George Osborne unveiled his first “normal” Budget. His first budget was the “emergency” Budget last June which had to address the immediate consequences of the economic mess left by the outgoing Labour government. This time he had the opportunity to spend more time addressing the immediate concerns of the nation and make any necessary tweaks to the course he set last June.
The Budget today was trailed in the press pretty accurately but Osborne saved a surprise for the end. The usual inflation increase in fuel duty has been postponed; the inherited plan for a 1p above inflation fuel duty “escalator” has been scrapped until 2015; and to add a further relief for motorists the rate of fuel duty was actually CUT by an extra 1p per litre from 6pm tonight. This was received with cheers from the Coalition benches and shock from many on the Labour side who realised that the price of petrol will now be 3p per litre less than it would have been under Labour’s plans, even including the VAT increase. These measures will be funded by additional tax on the oil companies which are making record profits as a result of the oil price rise. This is good politics and very good news for hard pressed motorists.
Income Tax payers will be happy at a further increase in the basic personal tax allowance by £630 from April 2012 to a new level of just over £8,000. Osborne also proposed the possibility of merging Income Tax and National Insurance. This makes great sense but would have to be handled sensitively in order to avoid some unintended consequences. Any measure to simplify tax and make the system more comprehensible should be welcomed.
To boost business Corporation Tax is to be cut by 2% next month rather than the planned 1% cut. There will be a further 1% cut in each of the next three years. The tax code will be simplified and small business will be exempted from many regulations. There will also be 21 new enterprise zones in England which will benefit from tax breaks. 40,000 new apprenticeships will be created and 100,000 new work experience places.
Short term growth forecasts were downgraded and medium term forecasts were increased. I have never put much store by growth forecasts, they are invariably wrong! Gordon Brown made this into an art form by constantly over-estimating in order to make his books balance. At least now we have the independent Office of Budget Responsibility to add some credibility to Osborne’s numbers.
Alcohol and tobacco duty is to rise by 2% ahead of inflation and a review of the duty regime has been promised.
All in all it is a sensible budget containing many measures to help business to stimulate economic growth and the creation of jobs. With the appalling legacy left by Labour Osborne always had a difficult job but he has made an excellent start and credible commentators are praising his deficit reduction plan. Inflation remains a concern but I will happily predict that economic growth this year and next will come in above current estimates with the consequent boost to the fiscal position and size of Labour’s deficit and debt burden.
Some of us are used to Labour running Britain into economic difficulties and the Conservatives having to sort it out. This time it is good to have the Lib Dems on board through the hard times. Labour today had no answers, no plans of their own and no credibility. As we can see in Reading they have only negativity and scares.