The FT’s Westminster blog is running live commentary on the Budget. Join us here from 12.30pm, London time.
Commentary led by Jim Pickard and Alex Barker of the FT’s political team, Michael Hunter, markets reporter, Gordon Smith, FT.com’s deputy news editor and co-ordinated by Darren Dodd, of the UK newsdesk.
FTSE 100 unchanged at 5,763.64 after the Budget. Sterling down 0.8 per cent at $1.6230, yield on 10-year denominated UK government debt down 4 basis points at 3.57 per cent.
Chancellor sits down at 1.39pm.
Jim Pickard: I wonder what Robert Chote makes of the new ‘fair fuel stabiliser’ – the OBR chief expressed doubts about this a few months ago.
Also, how does the cut in fuel duty – and freezing of air passenger duty – fit with the coalition’s promise to raise ‘green taxes’ as proportion of the total?
Fuel duty cut by 1p per litre from 6pm tonight.
North Sea supplementary production tax to rise from 20 per cent to 32 per cent from tomorrow, raising £2bn.
Petrol prices have become a “huge burden” – future fuel duty escalator increases, the first due next week, to be cancelled for the rest of this parliament.
Matthew Vincent: National insurance rate rise means higher-rate taxpayers will be subject to combined tax and NI deductions of 42 per cent, top-rate taxpayers will lose 52 per cent, from April 6.
£600 rise in the personal allowance comes on top of the £1,000 rise taking effect next month: the latest increase will benefit everyone earning up to around £115,000.
But the threshold for higher rate tax comes down to £42,475 from April, which is expected to draw 750,000 middle earners into the 40 per cent band for the first time. Hence the reference to not drawing “any more” people into 40 per cent tax – three quarters of a million is evidently enough for now.
Private jets, currently exempt from air passenger duty, to be taxed. Rise in air passenger duty postponed until April next year.
No further changes to alcohol duties announced in Budget 2010.
Tobacco tax rate up 2 per cent above inflation.
Rate of vehicle excise duty to rise by inflation only but rate on haulage vehicles to be frozen.
Now for allowances:
Public sector workers earning less than £21,000 a year to receive an extra £250 this year.
From April 2012 personal tax allowance to rise to £8,105, a rise of £630 a year from 2010-11.
Alex Barker: Ian Mulheirn of the Social Market Foundation has done the maths on the decision to uprate the personal allowance with the consumer price index:
“CPI uprating of personal allowance will net around £500m in 2012-13, £1bn in 13-14, £1.5bn in 14-15 etc etc. This change will wipe out the £600 increase in the personal allowance in about 6 years and then cut it further.”
From April 2012 government introducing 10 per cent discount to inheritance tax for money donated to charities.
New scheme to allow Gift Aid to be claimed on donations of up to £5,000 a year to be allowed without any forms being filled in.
Capital gains rules for companies to be tightened as part of measures designed to combat tax avoidance.
New strategy for tackling tax avoidance including new relief measures.
Now for tax avoidance/evasion.
Jim Pickard: The Budget seems quite benign but don’t forget the painful cuts and big tax rises announced last autumn – of which 16 kick in next month. Osborne would prefer you to forget these.
New flat rate single tier state pension worth around £140 per week. Not to apply to current pensions though. No detail on when will be introduced.
Gift Aid benefit limit increased from an upper limit of £500 to £2,500.
Martin Sandbu: Getting a more automatic link of state pension age to life expectancy would be very significant.
A more appropriate rate for public sector pension growth will be inflation-plus-GDP-growth.
The government accepts the findings of the Hutton Report on public sector pensions as a basis of consultation with unions.
Jim Pickard: No one could possibly remember this long list of growth initiatives; shades of supermarket sweep. Devil will be in detail has always….
On pensions: Future rises in state pension age to be linked to automatic mechanism.
Now for employment and training.
At least 24 new technical colleges to be established.Funding for another 40,000 apprenticeships for young people this year.
Jim Pickard: New carbon floor price of £16 per tonne isn’t much higher than current market price: I think the Greens will consider it rather low (although it will double in time). It will also be seen as a discreet subsidy for nuclear.
Chancellor plans to incentivise green energy usage. To introduce price floor of £16 per tonne for carbon dioxide emissions this year, rising to £30 per tonne by 2020.
The green investment bank is to reveive an extra £2bn from asset sales and begin operations a year early in 2012.
Green investment bank to be allowed to borrow subject to government meeting its overall debt target.
From April, small companies R&D tax credit to rise to 200 per cent next month and 225 per cent in 2012.
Government to fund 21 enterprise zones, up from 10.
First 10 to be created in built-up areas including Bristol, Sheffield and north east. A further zone will be located in London, with a further 10 to be announced in the summer.
Treasury considering cutting corporation tax rate in Northern Ireland to allow the country to compete more effectively with the Republic.
Matthew Vincent: Enterprise zones are not an 80s throwback – like Duran Duran, they never went away. High earners’ accountants have been using them for years to get up to 98 per cent tax relief on commercial property syndicate investment. Not yet clear if this property investment relief will remain.
Alex Barker: A crafty political move from Osborne. Adjusting the bank levy to ensure it offsets the impact of the corporation tax cuts robs Labour of one of their favourite political attack lines. Amid all the laughter in the Commons, Ed Balls, the shadow chancellor, did look a little red.
Osborne announces series of measures to promote UK manufacturing including new centre for research, £100m to be invested in new science research and development facilities across the UK.
Martin Sandbu: I was becoming impressed by the boldness of combining income tax and NI – until it turned out the government will only “consult” on this. Business will be happy about the windfall from extra corporation tax cut. But how much will a 1p difference boost growth?
Taxation on high value property to be increased.
Rate relief holiday for small businesses extended from October 2011 to October 2012, at a cost of £370m.
Stamp duty to be levied on mean value of property not bulk cost.
Real Estate Investment Trusts to be simplified to encourage home building.
New £250m commitment to first-time buyers to help 10,000 families to get on the property ladder for the first time, funded from proceeds of the bank levy.
Support for Mortgage Interest Rate scheme extended.
Matthew Vincent, FT Money editor: Income tax relief on enterprise investment schemes to 30 per cent makes it as generous as venture capital trusts – but with much more generous investment limits. EISs now become the tax efficient pension alternative for high earners
Changing the rules on qualifying companies also widens scope – and could make EIS less risky for private investors
High value property crackdown could hit inheritance tax planning schemes.
Income tax relief on the enterprise investment scheme increased from 20 per cent to 30 per cent from April 2. Entrepreneur relief increased to £10m.
Non-domiciles tax relief – charge increased to £50,000 for non-doms in the UK for over 12 years. Charge to raise more than £200m over coming years.
Chancellor confirms no further changes to taxation related to non-domiciles in this parliament.
Also non-doms to get tax relief on investments made into UK businesses.
Martin Sandbu, FT editorial writer: Business will be happy about the windfall from extra corporation tax cut. But how much will a 1pp difference boost growth?
Robert Shrimsley, FT.com managing editor: Osborne niftily dodges attacks that he’s cut taxes for banks, by offsetting the bank levy to negate the impact of the 2p corporation tax cut. Does this mean he’s exempting banks from the message that “Britain is open for business?”
Measures to help small businesses to include the removal of regulatory measures costing £350m.
From today chancellor says he’ll introduce new assumption into planning system of sustainable development.
Chancellor to cut corporation tax by 2 per cent next month and then by 1 per cent for the next three years ending at taget of 23 per cent.
Jim Pickard: Corporation tax to fall by 2 per cent as FT predicted this morning. Plus bank levy will be adjusted so City of London doesn’t benefit.
New rules will apply a new 5.75 per cent rate on overseas financing income coming into the UK.
Jim Pickard: Osborne wants to merge national insurance and income tax; the big question is when? Answer: there will be a consultation which will take ‘a number of years.’.
Chancellor consulting on merging National Insurance and income tax to simplify tax system.
Chancellor keeps community tax relief but abolishes 43 other special relief measures.
The Budget removes over 100 pages from the UK’s tax code
Jim Pickard: Osborne praises Lord Nigel Lawson – he is up in the gallery gazing down.
Taxes should be efficient and should support growth as well as simple to understand and easy to comply with – the Office of Tax Simplification’s recommendations allow the Budget to abolish 43 major reliefs.
Jim Pickard: Bad news for green investment bank, which won’t get borrowing powers until UK debt mountain is falling. Osborne has just predicted that debt as proportion of GDP will not fall until 2015/16 – in the next parliament. That means the flagship new entity will only be a fund for several years, not a proper bank.
Borrowing forecasts are higher than targets set out at last year’s emergency Budget, which were:
Chancellor lays out borrowing targets for next 5 years: £146bn this year, then £122bn, £101bn, £70bn in 2013-14, then £46bn in 2013-14, falling to £29bn in 2015-16.
Debt should be falling as a share of GDP by 2015-16.
Chancellor says the UK’s foreign currency reserves will be rebuilt with the purchase of a range of high quality assets; but the gold price remains too high to repurchase gold.
Jim Pickard: Inflation forecast is now between 4 and 5 per cent. This is higher than earlier official forecasts and means higher payouts in benefits and to gilt investors.
Inflation forecast to remain between 4 and 5 per cent this year, falling to 2.5 per cent next year and to 2 per cent in 2013.
Chancellor says asset purchase scheme to help crisis-stricken banks will remain in place.
Jim Pickard: Chancellor says we can’t go on like this. Later no doubt he will say we are in this together: slogan-tastic.
This is followed by growth of 2.5 per cent in 2012, 2.9 per cent in 2013, 2.9 per cent in 2014 and 2.8 per cent in 2015.
Chancellor cuts 2011 growth forecast from 2.1 per cent to 1.7 per cent.
Jim Pickard: Osborne points out that Greek interest rates are over 12 per cent and Ireland’s are 10 per cent while ours are under 4 per cent. Compared with Europe’s basket cases we are okay.
In addition to the Red Book, the chancellor will publish his plan for growth.
Stability, credibility and lower interest rates are all achievements made since the emergency Budget.
The UK’s fiscal plans have been endorsed by the IMF, the OECD as well as business organisations across Britain, Osborne says.
Jim Pickard: Osborne claims UK now has economic stability. Not sure Miliband will accept this statement of ‘fact’ – given GDP fall in last quarter.
Chancellor says will not need to ask for more money from the British people. It will be a fiscally neutral Budget.
Chancellor says decisions to cut deficit have brought economic stability.
Budget designed to create “enduring growth” and to “secure jobs for the future”
George Osborne stands to outline his first full Budget at 12.33pm.
Jim Pickard: Can’t see Gordon Brown in the chamber – then again it’s a bit of a ‘where’s wally’ exercise on such a busy day. He may be lurking behind the speaker’s chair, for example.
A few minutes before the start of the chancellor’s speech, the FTSE 100 stood 3 points lower at 5,759.49; sterling was down 0.6 per cent against the dollar at $1.6272 while the yield on 10-year denominated UK government debt was 6 basis points lower at 3.54 per cent.
Good afternoon. We’re just waiting for the end of prime minister’s questions and the start of the main event.