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Budget 2013
Overview
Todays Budget will likely be remembered chiefly for Chancellor George Osbornes plans to stimulate the housing market. In what he called his biggest tax cut, he committed the Government to providing 12billion of funding to help guarantee new mortgages and 3.5billion to invest in shared equity loans of up to 20% of the value of new-build homes worth 600,000 or less. The latter cash injection starts almost immediately; the larger scheme begins in a years time, perhaps because Mr Osborne will want to see the housing market showing greatest buoyancy in the year before the 2015 General Election. It is unclear how the mortgage guarantee will be treated when calculating overall Government borrowings.
The majority of the Budget was a commitment to more of the same any change of course would have been seen as politically weak. In a Budget which he trumpeted as one supporting an aspiration nation, the Chancellor cancelled this Septembers rise in fuel duty, committed to lower 20% - corporation tax for all businesses from 2015 and raised the income tax threshold to 10,000 from April 2014, a year earlier than promised. The Chancellor also announced that all UK companies would benefit from a 2000 reduction in National Insurance contributions, a measure designed to encourage growth in the small and medium enterprise sector. In less positive news, the growth forecast for the year ahead has been halved to 0.6%, Government borrowing continues to remain stubbornly high and just this morning unemployment rose. The Chancellor suggested that the UK economy will avoid a second quarter of contraction this year, which would be called a triple dip recession in economists jargon, but the outlook remains bleak for the remainder of this Parliament. So, in an appeal to voters to look beyond 2015, Mr Osborne promised to cap care costs at 72,000 and introduce the single-tier, flat rate 144 per week pension from 2016, earlier than originally planned. There were announcements on tax breaks for employee share ownership and reduced capital gains liabilities. Low emission vehicles and shale gas exploration will get tax incentives. To encourage people to celebrate, the Chancellor lopped a penny off the price of beer and scrapped the beer duty escalator altogether.
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Budget 2013
Key announcements
Economic forecasts and borrowing
The Office of Budget Responsibility halved the forecasted growth for 2013 to 0.6 per cent, meaning the UK will escape a triple dip recession. Growth predicted to be 1.8 per cent in 2014; 2.3 per cent in 2015; 2.7 per cent in 2016 and 2.8 per cent in 2017. Borrowing will of 144bn this year, falling to 108bn in 2014; 97bn in 2015 and 87bn in 2016. Borrowing as share of GDP to fall from 7.4% in 2013-14 to 5% in 2015-16. Debt as a share of GDP to increase from 75.9% in 2012-13 to 85.1% in 2015-16. The deficit has been reduced by a third since 2010. Inflation target of 2 per cent to stay in place. Bank of England to gain extended remit to allow for focus on growth. Unemployment is up by 7,000 to 2.52 million.
Budget 2013
Economic bads
Beer duty escalator has been scrapped and duty is to be cut by 1 per cent this month. All other alcohol duties to rise by 2 per cent above inflation. Tobacco duty remains unchanged -continuing to rise by 5 per cent above inflation.