Wednesday gave us the Budget, the Chancellor’s annual statement about the state of the economy and the changes in taxation and fiscal policy for the next year and beyond. Mr Osborne reported the economy is continuing to recover, faster than forecast, but there is still more to do to mend the economy from the condition in which he inherited it.
The economy is forecast to grow by 2.7% this year, faster than any other European economy. Unemployment continues to fall and 1.3 million new jobs have been created in the private sector. The deficit is down by a third but is still one of the highest in the world and we continue to borrow too much. Osborne expects the deficit to be eliminated in 2018-19 unless the Opposition wins the 2015 election and changes his policies.
The Chancellor dubbed his Budget as one for building a resilient economy that is driven by manufacturing and exports rather than consumer spending and credit. He wanted to leave more of our money in our pockets so the income tax threshold would be raised to £10,500, taking 3 million of the poorest out of the tax and making the typical taxpayer £800 better off. He also raised the threshold for the top rate in two steps to £42,285 by next year.
Other measures to make people better off include cancelling September’s fuel tax increase, freezing council tax and a £7 billion package to cut energy prices. Some will also welcome the 50% cut in bingo duty but tobacco duty will rise again by 2% whilst beer duty is reduced by 1p per pint and duty on cider, whisky and other spirits is frozen. At the same time, welfare benefits will be capped and only rise in line with inflation. Parliament will be asked to authorise this so that any government in future will need to seek similar authority, to try to prevent welfare costs spiralling out of control.
HMRC have stopped half of all registered tax avoidance schemes and their budget to tackle non-compliance is increased to save the taxpayer £100 million. The Chancellor claimed that income inequality is at its lowest for 28 years and the rich are making the biggest contribution to reducing the deficit but this was challenged by Ed Miliband.
The biggest surprise was the reforms to pensions provision. Last year the Chancellor increased the state pension and excluded it from the benefits cap. Now he has abolished the requirement for pensioners to buy an annuity with their pension pot. Anyone who did that in the past was liable to punitive tax rates but Mr Osborne said that pensioners should be trusted to use the money they have earned and saved prudently.
Politically, the Chancellor’s objective was to create a ‘feel good’ factor before the 2015 election. Voters have to decide whether to give him another term to complete the economic recovery or prioritise other policies. Our duty is to prayerfully decide the values that matter most and vote accordingly.