Defiant Chancellor pledges support for an 'aspiration nation'
Delivering his fourth Budget statement to an animated House of Commons, Chancellor George Osborne pledged his support for 'aspiration' and vowed to face the UK's economic challenges 'head on'.
Confirming widespread concerns over the grim economic outlook, the Chancellor announced that the Office for Budget Responsibility had slashed the official growth forecast for 2013 from 1.2% to 0.6%. However, despite acknowledging that dealing with the deficit was taking 'longer than hoped', and that borrowing would rise to £114bn this year, the Chancellor insisted that the Government was 'slowly but surely fixing our country's economic problems'.
Heralding his Budget as a mandate for those who aspire to 'work hard and get on', the Chancellor unveiled some significant measures aimed at supporting businesses and individuals, with headline announcements including an additional reduction in the main rate of corporation tax, bringing the tax down to 20% from 2015, and a much-anticipated increase in the income tax personal allowance, which will see the threshold reaching the Coalition's £10,000 target in 2014, a year earlier than originally planned.
Businesses are set to benefit from a new Employment Allowance, which will cut employers' national insurance bills by up to £2,000 from next April, exempting an estimated 450,000 small businesses from paying any national insurance contributions.
Other measures include an annual £3bn boost for UK infrastructure from 2015, together with support for homebuyers through the extension of shared equity schemes, offering loans of up to 20% to buyers of new build homes.
The Chancellor also confirmed the Government's recently announced plans to offer 20% tax relief on childcare up to the value of £1,200 a year per child from 2015, together with a bringing forward of both the new single flat-rate pension and a £72,000 cap on social care costs, to 2016.
Meanwhile, acknowledging the financial pressures facing families, the Chancellor confirmed the cancellation of the rise in fuel duty planned for September, and raised some cheer in the House with the announcement of the scrapping of the beer duty escalator.
- Corporation tax main rate to fall to 20%
- Income tax personal allowance to rise to £10,000 in 2014
- Employers' national insurance cut by £2,000
- Tax-free childcare vouchers worth up to £1,200 per child
- 20% shared equity loans for new build homes
- September fuel duty rise scrapped
2013 Economic Forecasts
'No Plan B' - An economic background to the Budget
When George Osborne became Chancellor in the spring of 2010 the national budget deficit - the difference between the Government's annual spending and receipts - was estimated at a record £163.4bn. Tackling the deficit was declared the Coalition's 'top priority' and in his first Budget speech - the June 2010 'Emergency Budget' - Chancellor Osborne outlined his plan to eliminate it completely by 2014/15. This would be achieved by a combination of lower public spending and tax rises in an approximate ratio of 80:20, signalling an approach known as 'Plan A' in political circles and dubbed by the media as an 'austerity' programme.
In reality, the Emergency Budget forecasts proved unattainable. In his 2013 Budget statement the Chancellor was forced to announce that by 2014/15 the deficit will stand at 5.9%, far from the originally predicted surplus of plus 0.3%.
There have been other difficulties for the Coalition, with economic growth slow at best and a 'double-dip' recession.
Yet the Chancellor has consistently rejected Labour's calls for a 'Plan B' - which proposes borrowing more to spend on capital investments in the hope of stimulating growth - on the grounds that any positive effects of such actions would be far outweighed by the risk of an increased cost of borrowing, should the markets react badly to the Government's change of course.
Even the loss of the UK's AAA credit rating last month has not altered the Coalition's determination to stick to Plan A. In a speech made just a fortnight before the 2013 Budget, Prime Minister David Cameron reaffirmed his Government's commitment to its course, saying: 'There are some people who say that our focus on deficit reduction is damaging growth, and what we need to do is to spend more and borrow more. It's as if they think there's some magic money tree. …If there was another way, an easier way, I would take it. But there is no alternative.'