There is some good news in the budget. The increase in the ISA allowance for savers to £15,000 and the ending of the disticntion between cash Isas and the rest is a welcome simplification with more generous tax relief. The forthcoming Pensioner bonds from National Savings may well offer a reasonable and secure income. The offer of much greater flexibility of what to do with your pension saving is also welcome, though the details still need to be worked out in some cases.
Total public spending at 42.5% of our national output next year is still too high a proportion of the total economy, but is down from the excessive 47.5% of 2009-10. The aim is to get it down to 38% by 2018-19. Total spending rose this year in real terms. As expected, the Tax threshold was raised to £10,500 for next year. There was also a small increase in the 40% tax threshold.
The Chancellor recognised the need to do something to cut energy prices. He himself highlighted the dangers of UK energy prices twice the US level, and has extended and improved a scheme to subsidise high energy using industries for their energy costs. The better answer must be to find and produce much larger quantities of cheap gas for ourselves. The Chancellor is offering tax assistance to North Sea oil and gas developments, and states that he supports shale gas extraction. The Uk still remains way behind the US in finding and using this new hydrocarbon source.
The Red Book warns that “Energy intensive Industries pay almost 50% more for their electricity than they do in France, and the cost to business of policies to deliver low carbon energy infrastructure is set to increase by about 300% by 2020.” This is a massive threat ahead, and should persuade the government to demand changes to EU energy policies so that the UK can opt for cheaper energy which could help power an industrial revival. The goverbnment is offering £500 m in subsidies a year to energy intensive industries from 2015-16 to compensate them for dear green energy, subject to EU approval.
The long term reforms to achieve a low rate of Corporation Tax now give the UK a competitive advantage with a 21% tax rate. The Chancellor added to that a £500,000 investment tax allowance for business.
The main figures in the Budget are little changed from the December Statement. Growth is forecast to be a little higher, unused capacity a bit lower. The Budget concentrates on trying to assist industry to invest, savers to save, and individuals to enjoy some real growth in income.