The Chancellor of the Exchequer, the Rt Hon George Osborne MP, delivered his sixth Budget to the House of Commons on 18 March 2015, his last before the General Election on 7 May. The Budget, which is potentially Mr Osborne’s most politically significant effort to date, focused on the improving health of the national economy and promoted significant investment in the regions.
The Office of Budget Responsibility (OBR) has revised growth expectations for 2015 up from 2.4 per cent to 2.5 per cent. Forecasts for 2016 have also risen to 2.3 per cent, reaching 2.4 percent in 2019.
This report provides a brief synopsis of the key announcements, focusing specifically on issues relating to property, planning, energy and the built environment.
Growth, borrowing and public finances
The budget deficit
The Chancellor stated that the budget deficit has been cut to 5 per cent, when measured as a proportion of GDP. The budget deficit for 2015-16 is expected to fall to 4 per cent of GDP, and is then projected to fall to 2 per cent in 2016-17 and 0.69 per cent in 2017-18. By 2018-19 the Government expects to be running a small surplus of 0.2 per cent, increasing slightly to 0.3 per cent in 2019-20.
The Chancellor announced that national debt as a share of GDP will be falling by the end of this Parliament. The debt forecast for 2014-15 is 80.4 per cent, reaching 80.2 per cent in 2015-16, and falling over the next three years before reaching 74.8 per cent in 2018-19.
Inflation forecasts for 2015-16 have been revised down to 0.2 per cent and forecasts are also lowered for the following three years, reflecting the dramatic decline in the global price of oil and food.
The Chancellor announced that a further £30 billion of spending cuts would be required by 2017-18, of which £13 billion would be achieved through reductions in departmental spending and £12 billion achieved through savings made in welfare payments. A further £5 billion would be delivered through restricting tax avoidance, evasion and aggressive tax planning.
Unemployment is set to fall further than anticipated in the Autumn Statement, dropping to 5.3 per cent for 2015. Speaking about new jobs created, the Chancellor said that 80 per cent are full time positions and 80 per cent are in skilled occupations. The rate of unemployment is forecast to fall further to 5.2 per cent in 2016.
Housing, development and infrastructure
The Chancellor reiterated his commitment to creating a “northern powerhouse” with forthcoming initiatives including a new comprehensive Transport Strategy published this week, funding for the Health North initiative, and promoting the chemical and tech industries in the region.
The Budget built on the latest wave of devolution to Manchester – which will see the city take control of health, social care and transport through a new metro mayor – by introducing the devolution of 100 per cent of business rates growth.
A new city deal was also confirmed for the West Yorkshire Combined Authority, while negotiations are ongoing for a city deal for Cardiff.
Eight Enterprise Zones across the country will be extended, and two new zones will be introduced in Plymouth and Blackpool.
The Chancellor reiterated the Government’s commitment to improving connectivity in the South West including a £7 billion investment in transport infrastructure such as roads and air links. A new rail franchise for the Great Western Route will be introduced, including new £3 billion Intercity Express Trains.
The Mayor of London will also be given further powers over planning and skills, including authority over sightlines and wharves, and the Apprenticeship Grant for Employers budget.
The Budget also confirms £97 million of funding to support the regeneration of Brent Cross in the London Borough of Barnet. There will also be £1 million invested in the London Land Commission to create a database of all public sector and brownfield land in the capital.
£7 million has also been set aside to invest in the Croydon Growth Zone, unlocking 4,000 new homes.
20 Housing Zones will be introduced nationally, not including the programme already announced for London. The Government will continue to work with a further eight shortlisted areas, and aims to support the creation of up to 45,000 new homes.
The Budget commits up to £600 million to improve mobile networks and Wi-Fi connectivity, including funding for Wi-Fi in public libraries and a target of making ultrafast broadband of at least 100 megabits per second available to nearly all homes in Britain.
Compulsory purchase orders
The Government has launched a consultation on the compulsory purchase regime, with the aim of making the process faster and supporting brownfield development.
Government occupiers in state-owned freehold buildings will be charged market rents.
North Sea oil
Following the decline of global oil prices, the Chancellor announced that the supplementary charge on oil would be reduced from 30 per cent to 20 per cent and that the Petroleum Revenue Tax will be cut from 50 per cent to 35 per cent. Government will be investing in new seismic surveys in under-explored areas as well.
The Chancellor confirmed that fuel duty would remain frozen.
It was announced, further to a previous statement by the Rt Hon Ed Davey MP, that the Government has entered negotiations to support Swansea Bay Tidal Lagoon in the creation of a new tidal energy power station.
£60 million of investment will also be assigned to a new Energy Research Accelerator in the Midlands and a new national energy catapult will be based in Birmingham.
Taxation, incentives and other measures
Further to his announcement in the Autumn Statement, the Chancellor stated legislation giving Northern Ireland responsibility for setting its own rate of corporation tax had passed in the House of Lords yesterday.
The Chancellor reaffirmed the Government’s commitment to the recommendations of the Smith Commission, which outlined what political and economic powers should be devolved to Scotland.
The Chancellor announced a new Help-to-Buy ISA, which will see the Government match every £200 saved with a further contribution of £50 for first-time buyers, up to a maximum of £3,000. The ISA will be available for properties worth up to £450,000 in London and £250,000 in the rest of the country.
An increase to the ISA saving limit will take effect in two weeks’ time, taking the total amount to £15,240 per annum. The Chancellor announced legislation to create a new ‘Flexible ISA’ which will allow savers to move money in and out of an ISA without losing the tax-free entitlement.
Following a number of radical announcements in the Autumn Statement, the Budget announced that the cap on the Lifetime Allowance will be lowered from £1.25 million to £1 million. This new limit will be index linked to inflation from 2018.
The 55 per cent tax on pensioners who wish to access their annuity will also be abolished from next year, with tax being charged at the usual marginal rate, increasing choice for pensioners.
The Chancellor announced that further to the new tax-free personal allowance of £10,600 coming into effect in two weeks' time, the allowance will be extended to £10,800 next year and £11,000 in 2017-18.
The Chancellor also introduced a new tax-free personal savings allowance for the first £1,000 saved, or £500 for those paying a higher rate of tax.
Previously announced reductions to the rate of corporation to 20 per cent are set to come into effect this April.
Earlier this week it was announced that the Government will conduct a thorough review of the business rates system, and that small business rate relief will be extended.
The Chancellor also announced that Greater Manchester and East Cheshire, along with Cambridgeshire and Peterborough, will be allowed to retain 100 per cent of the additional growth in local business rates.
The Chancellor confirmed that the National Minimum Wage will rise to £6.70 this autumn, and the apprentice rate will increase by 57p to £3.30 an hour.
The levy on banks is to be raised to 0.21 per cent, which will aim to raise £900 million per annum. It was announced that over the coming year a further £13 billion of mortgage assets held from the bailouts of Northern Rock and Bradford and Bingley will be sold, as well as £9 billion of Lloyds Bank shares.
Banks will also be restricted from deducting compensation claims, such as PPI, from their corporation tax bill.
Research and development
The Chancellor announced £138 million of funding toward the UK Collaboration for Research in Infrastructure and Cities, to investigate ways to improve infrastructure in key UK cities.
£100 million of investment was announced for research into the development of driverless car technology. A further £40 million is to be invested in business incubator space and a research hub to develop applications for 'Internet of Things' technologies in healthcare, social care and Smart Cities.
As part of a wider set of measures aimed to reduce tax avoidance, the Chancellor announced a new review of the practice of avoiding inheritance tax through a deed of variation. The report is due in the autumn.
Diverted profits tax
The Chancellor confirmed that legislation to require large multinationals to report their profits by country will come into effect at the start of April.
It was also announced that corporation tax would be amended to prevent companies from offsetting losses against future tax and businesses will no longer be able to take account of foreign branches when reclaiming VAT on overheads.
Duty on beer is to be reduced by 1p per pint, and by 2 per cent on cider and spirits. Duty on wine has been frozen.
Further to funding announced in the Autumn Statement for Masters courses, new support has been announced for PhDs and research-based masters degrees as well.
Tax relief for TV and film companies will be increased to 25 per cent, and new tax relief will be available to orchestras from April 2016.