The Chancellor’s 2013 Budget has been hailed by the Government and Coalition partners as the “Budget for people who aspire and desire to get on”.
The statement was preceded by the Office for Budget Responsibility’s (OBR) latest economic outlook, which stated that the UK will avoid a triple dip recession - albeit by a fine margin. The OBR’s outlook suggests the economy will grow by just 0.6 per cent in 2013, 1.8 per cent in 2014 and 2.3 per cent in 2015.
Borrowing will also be £61bn higher than previously planned, as the national debt levels are set rise to 85.6 per cent of GDP. These figures will not begin to fall again until 2017/2018 – 12 months later than previously suggested in the last Autumn Statement.
In light of these poor figures, the Government has constructed a Budget that seeks to promote growth whilst at the same time trying to support the “squeezed middle”, and avoid the series of Uturns that resulted from last year’s Budget.
New investments in childcare, scrapped planned increases in fuel and beer duties, together with the Government’s plan to bring forward the tax free allowance to £10,000 to April 2104, will all appeal to hard hit voters.
But the real flagship polices include the £3bn investment in infrastructure, Employment Allowance, which will see a £2,000 real time increase for employers and expanding the Help to Buy scheme. In response to today’s announcement, Labour’s Leader Ed Miliband said "This is the Chancellor's fourth Budget but one thing unites them all - every Budget, he comes to this House and things are worse not better for this country”.
Key announcements include:
1. Planning and development
- By May 2013, DCLG will produce a detailed plan setting out its response to the 2012 consultation on the energy efficiency requirements in building regulations.
- Planning System reform. Planning guidance will be significantly reduced, providing greater simplicity and clarity.
- Local areas will be expected to put in place “bespoke pro-growth planning policies and delivery arrangements”, as part of new Local Growth Deals, pursued in response to Lord Heseltine’s review, and through City Deals.
- Affordable homes: The Government will provide an additional £225m to support “further 15,000” affordable homes in England from 2015.
- The Build to Rent Fund will be expanded to £1 billion. This fund provides equity or loan finance to support the development finance stage of building new homes for private rent.
2. Access to Housing
- Help to Buy Scheme: The Government will commit £3.5bn of capital spending over the next three years on a shard equity loan of up to 20 per cent (5 per cent has to be put down by the buyers) to help aspiring home owners secure a deposit. This loan will be interest-free for page 3 of 4 the first five years. The maximum price a house can cost to be eligible is £600,000. This will be available from 1 April 2013.
- Mortgage Guarantee: The Government will use its balance sheet to back higher loan to value mortgages. The guarantees will sufficient to support £130 billion of mortgages and will be available from 2014, running for three years.
3. Personal finance and savings
- Corporation tax to be cut to 20 per cent in 2015.
- Personal tax allowance threshold will be increased to £10,000 in 2014.
- All alcohol except beer will increase inline with the alcohol duty - beer will receive a 1p cut.
- A new singe-tier pension will be introduced from 2016-17.
- Fuel Duty has been postponed for a further year.
4. Business finance
- Employment Allowance: An allowance of £2,000 per year for all businesses and charities to be offset against their employer National Insurance Contributions bill from April 2014.
- Tax Avoidance: General Anti-Abuse Rule will be introduced in the Financial Bill 2013. The Isle of Man, Guernsey and Jersey have agreed to enter tax information exchange agreements with the UK. These measures are focussing in particular on offshore intermediaries.
- The Banking Levy will increase to 0.142 per cent in 2014.
- The stamp duty on trading markets including ISDX and AIM is being scrapped.
- A new tax relief to encourage investment in social enterprises is set to be introduced.
- Growth vouchers for small businesses will be introduced, doubling the size of the loans (to £10,000 ) that employers can offer tax-free to pay for items such as season tickets for commuters.
- Wider reforms will occur, expanding the remit of the Monetary Policy Committee, to increase to the powers of the incoming Bank of England Governor Mark Carney.
- Infrastructure plans will be boosted by £3bn a year from 2015-16, amounting to £15bn of extra capital spending over the next decade.
- Providing regional cities with “greater control over their destinies”. This will be achieved through the Single Local Growth Fund, devolved to the local level through new Local Growth Deals – which formed a key part of Lord Heseltine’s recommendations.
- Devolve significant funding to Local Enterprise Partnerships (LEPs)
6. Creative Industries
- The Technology Strategy Board will design and launch a new competition of up to £15m inviting consortia bids to support digital content production through partnerships with industry.
- Funding for the Skills Investment Fund will be increased to £8 million each year over the next two years.
- The Government will match the funding of voluntary industry contributions to support skills development in the UK digital content sector.
- A public consultation will occur on options to provide further support for the visual effects industry through the tax system.
- As announced in the 2011 Budget the carbon price floor will come into effect in April 2013.
- Two Carbon Capture and Storage projects have been announced.
- Extended ring-fence expenditure supplement from six to ten years for shale gas projects.
- Additionally they are going to simplify the planning process for shale gas projects and “develop proposals by summer 2013 to ensure that local communities will benefit from shale gas projects in their area”.
- Tax incentives will be introduced for ultra low emission vehicles.
8. Childcare and social care
- Families can claim £1,200 per child, per year from 2015, as long as both parents work.
- A further £200m will be provided to increase childcare support in the Universal Credit.
- The Government will consult on options for transferring savings held in Child Trust Funds into Junior ISAs.
- The Government will introduce a £72,000 cap on reasonable care costs and extend the means test from April 2016.
If you would like to discuss the information below, and what it means for your company, please do get in touch via Jim.Dickson@fourcommunications.com or on 0870 626 9000.