Thursday, 17 March 2016

Budget 2016

Yesterday George Osborne delivered his third budget in the last two years and it looked like this:

Spending....

                   2015     2016
Welfare            £222bn   £240bn
Social services    £ 30bn   £ 30bn
NHS                £141bn   £145bn
Transport          £ 28bn   £ 29bn
Education          £ 99bn   £102bn
Defence            £ 45bn   £ 46bn
DTI                £ 24bn   £ 24bn
Housing, environ   £ 28bn   £ 34bn
Police, intel      £ 34bn   £ 34bn
Debt interest      £ 36bn   £ 39bn
Other              £ 48bn   £ 49bn

Total spend        £742bn   £772bn

Taxes...

Income tax         £170bn   £182bn
National insur     £115bn   £126bn
Excise duties      £ 47bn   £ 48bn
VAT                £133bn   £138bn
Business rates     £ 28bn   £ 28bn
Council tax        £ 28bn   £ 30bn
Corporation tax    £ 42bn   £ 43bn
Other              £109bn   £120bn

Total receipts     £673bn   £716bn

Total borrow       £ 69bn   £ 56bn 

The usual suspects, Welfare, NHS, continue to get big rises and no spending actually gets cut. This is achieved by means of some rather heavy tax rises; income tax up £12bn, NI up £11bn, VAT up £5bn, and yet there were no headline rate rises. In fact quite the reverse, tax rates were either held or lowered. George is doing it all by assuming the country is going to get richer, and also by borrowing £56bn more over the life of the parliament than he said he would last year.

Oops, it's bit soon in the life of the parliament to have been blown off course by £56bn!

Osborne rose at 12:34 PM and started with a strong pro-EU message, claiming the independent Office of Budget Responsibility had predicted dire things if the UK voted for a Brexit. Unfortunately for GO the OBR later denied having any opinion on what would happen if the UK left the EU other than there might be a period of "uncertainty" - which is stating the obvious to put it mildly.

The OBR does have opinions on GDP and inflation though. GDP is going down and inflation is going up.
Year    GDP    Inflation
2015    +2.2%  0.7%
2016    +2.0%  1.6%
2017    +2.2%
2018    +2.1%

GO then went on to hit big business quite hard with taxes while giving breaks to small businesses, including a rather neat break for "micro" businesses: you can earn £1,000 a year totally tax free and off the books. This is probably necessary to keep HMRC viable. So many people are making a few quid here and there on Ebay or Airbnb and the like that HMRC would be swamped if they all registered as businesses and filled in the full set of forms.

The other big giveaway was raising the 40% tax band from £42,000 to £45,000 (ish) but not until April next year. What the point of a giveaway so far in the future is? Better would be not to announce until next year and get the plaudits straight away. Chancellors of old used to know to do this.

There was some SNP nose tweaking. Had Scotland voted "out" they would be coming up on independence just about now. Osborne cut the North Sea oil taxes in half while sneering that Scotland would be bankrupt without the UK (which is true of course, cue stony silence from the SNP benches.) He also froze the duty on "Scotch" whisky. He forgot to mention Irish whiskey which can't be good for his knees.

He then introduced a truly baffling "lifetime" ISA, only available to the under-40s, so not very lifetime. The deal is generous though, the  government will pay a whacking 25% interest (max £1,000 per year.) Much wailing and gnashing of gums among those too old to benefit. This "LISA" is supposed to be a hybrid mortgage deposit fund and pension scheme for those who cannot decide if they want a pension or a house. These days having both is off the cards. Thanks, Tony!

There were two big surprises. The first was the "Sugar levy" which will tax sugary drinks to stop kids getting fat, but not for two years so the manufacturers have time to replace the sugar with aspartame and give the kids brain tumours instead of diabetes. The second was the dog which did not bark: he didn't mess with pensions. It was thought he would axe the higher rate tax relief, but he didn't.

It was also suggested he would nail a tax dodge called "salary sacrifice" but he didn't do that either.

All in all, it was a weird little budget of no great consequence.

After an hour George sat down and Corbyn rose to respond. He gave such a lackluster speech that even his own MPs directly behind him chatted among themselves rather than listen to it. He really needed to have brought along Mao's little red book to liven things up. He rightly pointed out that Osborne's debt promises are complete fiction these days, but nobody was listening.

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