Westminster Blog

 

Welcome to the FT’s rolling coverage of the UK Budget.

By Kiran Stacey at Westminster and Gordon Smith, Michael Hunter, Darren Dodd, Tom Burgis and Ben Fenton on the FT news desk.

All times are GMT.

16.45 So, that is about it for the live blog. The main FT coverage can be found in the usual place.

We thought we would leave you with a small image of what life in the Financial Times London newsroom is like on Budget Day. Below, you can see Chris Giles, economics editor, briefing the rest of us on what it all means. This picture was taken less than two minutes after the Chancellor sat down at 13.29.

So, from the FT live news desk, enjoy digesting the ramifications of the 2012 Budget, whether you are an outraged pensioner, a relieved 1-percenter or the Chancellor of the Exchequer. FT Live Blogs will be back just as soon as something big enough breaks. Goodnight.

 

16.25 John Authers and Martin Wolf parse the 2012 Budget

16.06 The top trending phrase on Twitter in the UK at present is #grannytax.

And one of the main users of Twitter, Lord Prescott, has his say on the Budget.

16.01 The FT’s Christopher Cook tweets:

15.57 This was a budget, opines the FT’s Philip Stephens
that was in part “about George Osborne’s ambitions to establish
himself as David Cameron’s heir apparent”.

 

The chancellor talked about a Budget to put Britain back to work, but

the measure most likely to stick in the public mind was the cut from

50 per cent to 45 per cent in the top rate of income tax. It marked a

tilt to the tax-cutting right that he hopes will build his support on

the Thatcherite wing of the Tory party.

 

 

15.52 Podcast time.

 

15.48 Our colleagues over at FT Alphaville have been going through the
Budget documents and have found the official issuance plans for the
Osborne super-long bond.
The question, it seems, is not how long the bond should be, but how
big…

 

15.46 Jonnie Marbles, who we think is the man who shoved a foam pie in Rupert Murdoch’s face last July, offers his back of an envelope tax return for the prime minister.

15.40 Here is Andrew Bounds, Enterprise Editor, with his take on the changes to small business tax regimes.

Small businesses could be exempted from providing full accounts, saving them time and money in accountancy fees, under plans announced in the Budget.

George Osborne, the chancellor, said businesses with a turnover less than £77,000 could pay tax based on cash profits rather than full accounts from 2013 if there were not big objections to a consultation.

“This will make filling in tax returns dramatically simpler for more than 3m businesses,” he said.

 

The full version is now online.

15.35 Salamander Davoudi, media correspondent who covers the film industry for the FT, has sent her report on the tax breaks.

Producers of large-scale British television dramas and animation companies have been given a boost after George Osborne announced a tax break worth tens of millions of pounds designed to stop productions moving abroad to countries with more favourable tax regimes.

“Mr Speaker, it is the determined policy of this government to keep Wallace and Gromit exactly where they are,” the chancellor said. “Companies are moving to Britain, not away.”

The full version of the story is now on ft.com

 

15.25 An overview of the tax reforms in the 2012 Budget by our tax correspondent, Vanessa Houlder, has just dropped:

Big tax cuts for business and higher earners were unveiled on Wednesday in an attempt to make the tax system “more competitive, encourage business investment and support growth”. But the Treasury insisted that a new cap on reliefs and increases in stamp duty would result in a much higher tax take from the wealthy.

George Osborne announced a 5p cut in the top tax rate to 45 per cent from April 2013, after analysis by Revenue & Customs into the impact of the 50p rate concluded it was “a distortive and economically inefficient way of raising revenue, and that the behavioural response has been larger than expected.”

Offsetting the £100m a year cost of reducing the top tax rate, Mr Osborne announced a new cap on unlimited tax reliefs, which will be set at 25 per cent of income or £50,000, whichever is greater. He also announced an increase in stamp duty rates for high value property and new anti-avoidance measures, particularly for those using offshore companies.

The Treasury’s Budget document said: “Taken together, it is estimated that the reduction in the additional rate of income tax to 45 per cent, the 25 per cent cap on income tax reliefs above £50,000 and the increase in stamp duty rates for high value properties will result in an expected average contribution to the treasury from those with incomes of above £150,000 of an additional £1,300 a year.”

The Revenue has predicted that £2.4bn of income will be shifted forwards to the 2013-14 tax year, as individuals delay dividends and other income until the 45p rate is introduced. Francesca Lagerberg of Grant Thornton, the professional services firm, said: “If anyone has the wherewithal to wait until next April, they will.”

Mr Osborne also unveiled a further cut in the corporation tax rate, which will fall from 26 per cent to 24 per cent in April, after which it will fall in two stages to 22 per cent in 2014. Chris Morgan of KPMG said: “Overall it is pretty good for businesses with an eye-catching fall in the headline rate, although unfortunately there was nothing on infrastructure allowances.”

 

15.15 Back on the video games tax breaks, Barry Murphy, a tax partner at PwC, says:

“For many years the games industry has asked to be recognised for the value it drives, in a manner similar to the film Industry. It looks like it’s now game on with the Chancellor announcing tax breaks will extend to games, and some TV productions come back into the tax relief net too. This is good news for the British industry as it was under increasing competitive pressure from other countries offering lucrative credits.”

 

15.03 The FT’s Hannah Kuchler has produced a summary of who does well and who badly from Mr Osborne’s 2012 Budget:

Winners:

The rich

Those earning more than £150,000 and paying the 50p tax rate will now pay just 45p from 2013, after the chancellor cut the highest rate, saying it “damages the economy and raises next to nothing.”

The lower-paid

The personal allowance, the amount people can earn before starting to pay tax, will be raised to £9,205 from April 2013, well on the way to the government’s target of £10,000. Millions of the poorest people won’t have to pay tax at all, but almost all taxpayers will benefit. Lib Dems will be pleased as it was their manifesto pledge.

Business

Companies will have more money to spend as corporation tax is cut to 24 per cent straight away and to 22 per cent by 2014. Other countries with higher tax rates could lose out if this cut means more companies choose to invest in the UK.

Small and medium-sized businesses were treated to a raft of measures including improving access to finance and the possibility of enterprise loans for young people wishing to start their own company.

Wallace and Gromit, and other creative industries

The government has extended the film tax credit to video games, animation and high end TV shows. George Osborne said he wanted to keep the animated characters Wallace and Gromit “exactly where they are” after their maker, Aardman Animations, warned last year it was moving its TV production overseas.

Other industries to get a little help from the chancellor include life sciences, which will enjoy a tax cut on patents, while aerospace will get a new centre for aerodynamics.

Commuters in the North and London

The Northern Hub project – which includes improvements to the lines between Manchester and Sheffield, Preston and Bradford – will get extra investment. In London, commuters can look forward to longer commuter trains, reducing the crush on the way to work, and the possibility of new river crossings.

Losers:

The rich (who own mansions)

Mansion dwellers with homes worth more than £2m will be hit by 7 per cent stamp duty

Tax evaders

The chancellor promised little escape for tax avoiders as he gave more money to Revenue and Customs to track them down. He is especially targeting people who avoid stamp duty by selling their mansions through offshore companies, hitting them with a 15 per cent charge if they buy property through an overseas company, and looking at measures to target people who already have bought a house in this way.

Pensioners

Retired people will suffer as the pensioner’s personal allowance is frozen to make sure it is the same as for anyone else. The basic state pension will go up by £5.30 a week from next week and the government will introduce a new single tier pension – at no cost to the Treasury.

The young

Young workers dreaming about retirement will have to wait even longer if life expectancy continues to rise, as the state pension age wil now increase automatically in line with longevity. As life expectancy varies depending on region and social class, this could hit some people disproportionately.

Smokers

Rises in duty on tobacco and alcohol were expected but smokers were hit hard by a 5 per cent above inflation rise in duty. Expect panic-buying this afternoon as from 6pm tonight, the price of 20 cigarettes will cost 37p more.

Public sector workers in the North

In areas of the country where public sector pay outstrips compensation in the private sector, the chancellor confirmed he was considering freezing the pay of workers in public services. Guaranteed to rile a lot of people.

14.57 Here’s the latest market reaction from our updated UK equities report.

The FTSE 100 held steady after the UK Budget on Wednesday, with gains for sectors set to benefit from new government measures providing support.

The biggest movers were in the house building sector after George Osborne, chancellor of the exchequer, said the Get Britain Building fund would be expanded, with banks offering loan guarantees totalling £20bn.

Barratt Development jumped to the top of the mid-cap FTSE 250 index, climbing 4.6 per cent to 149.23p, while Bovis Homes claimed number-two slot, up 4.5 per cent to 515p. Persimmon gained 2.5 per cent to 677.33p while building supplies group Wolseley on the FTSE 100 gained 2.7 per cent to £25.61.

Technology companies were also highly sought after the chancellor announced incentives for British media and technology groups producing films and electronic games. Chip designers Arm Holdings and Imagination Technologies were both among the beneficiaries, up 1.6 per cent to 594p and 4 per cent to 700p respectively.

14.51 The cut to the top rate of income tax is causing quite some gnashing of teeth.

Via a BBC editor’s Twitter feed, here’s the reaction from Liam Byrne, the shadow work and pensions secretary.

And here is the

The veteran journalist Andrew Neil opines:

14.45 We have a good chunk of reaction from the union leaders, business lobbies and assorted analysts here. Some choice cuts:

Dave Prentis, general secretary of Unison union:

The chancellor’s Budget has given a helping handout to his rich friends in the City and delivered a slap in the face to the unemployed and low-paid families. Osborne should be delivering policies to get the 2.67m unemployed people back into work and economically active. Instead, the government’s cuts agenda is making the situation worse by adding to those numbers month by month.

Simon Denham, CEO of Capital Spreads

The banker bashing continues. Banks will be in the loser’s camp as they will not benefit from the cut in corporation tax. An extraordinary manoeuvre when it’s precisely them who we need to rely on to help boost credit to business and individuals.

Institute of Directors

A reduction in corporation tax is a very positive step, but we would still like to see a commitment to move to 15 per cent by 2020. This would make us truly competitive . . . While any tax reduction is welcome, the chancellor has not done enough to free business from the burdens and barriers that are holding economic growth back. Businesses dearly want the opportunity to invest, create and build, but George Osborne must go much further if he wants to fire up the engines of the economy. There was a bold move on corporation tax, but in the bigger picture this is still not far enough or fast enough.

14.43 How was it for you? Are you a winner, a loser, collateral damage? We are, as ever, keen to read your thoughts in the comments section below.

And apologies — we posted some calculations here a few moments again and it now seems we need to do our sums again. We’ll get back to you on those allowances.

14.30 Jonathan Eley, the editor of Investors Chronicle, one of the FT stable of publications, reckons that, from an investor’s point of view, the Budget contained some moderately pleasant surprises.

Pension tax relief, widely thought to be under threat at the top end, remains untouched – although the highest rate of relief will come down owing to the cut in the top rate of income tax to 45p. The cap on reliefs for those claiming over £50,000 will apply to very few people in practice.

However, the sting in the tail was a freezing of the age-related allowances, which will hit less well-off retirees and save over £1bn a year by 2015. And higher-rate relief may just have been granted a stay of execution. The past few years have seen so much tinkering with pensions rules that contributions to Isas – a relatively simple savings regime – now exceed contributions to pensions.

There was no change to the generous relief available on Enterprise Investment Schemes announced last year – for wealthy investors, these and Venture Capital Trusts remain a very useful tax shelter.

The clampdown on purchases of expensive properties using shell companies was perhaps more aggressive than expected, although again, very few UK investors will be directly affected. The introduction of a capital gains tax element does raise the question whether a profit-based tax like CGT would be more appropriate for all property transactions than a purchase-based one like stamp duty.

For equity investors, there was little in the Budget to alarm or excite. A further 1 per cent cut in corporation tax is unlikely to fix one of the economy’s biggest problems: big companies’ reluctance to invest their considerable cash holdings.

The revised taxation arrangements for fixed-odds betting terminals and offshore betting may hurt bookies, while the promise of simplified planning would benefit builder and a gas generation strategy sounds promising for the likes of Centrica but disappointing for the renewables industry.

14.21 And here is a potted version of the expert summary delivered to a rapt newsdesk by our economic editor, Chris Giles.

Our early take is that Osborne has used the money available from better economic forecasts to fund tax cuts. There remains a suspicion of spending cuts yet to be announced to help pay for this. We will be trawling Treasury documents. The child benefit taper is more generous than we expected. Who will lose out as basic, all-in pension rises to £140 a week?

Big changes for pensioners: automatic raising of retirement age as longevity increases, scrapping of agel-related allowances. Obviously a very big FT story is in the corporation tax cut, taking it down to 24p this year at a cost of about £800m. Further cuts to 22p with an ambition to reduce it to 20p. Other measures for boosting economy are “mildly interventionist”. We think the freeze on age-related allowances for over-65s raises about £3.3bn between now and 2016. So older taxpayers hit.

14.16 Our economics reporters have delivered a full take on the Budget.

George Osborne has cut tax on high earners and companies while also lifting more lower earners out of income tax, in a Budget he said “rewards work” and “unashamedly backs business”.

However, the budget was close to fiscally neutral as the chancellor reaffirmed Britain’s commitment to austerity.

14.07 Here are all those Budget documents in full.

14.00 As the dust begins to settle, here are the highlights of Osborne’s fiscally neutral but politically charged Budget speech:

• Top rate of tax cut to 45 per cent from 50 per cent in April 2013
• Personal tax allowances to increase to £9,205 next year
• Bigger cuts to corporation tax than previously announced, with new 22 per cent target by 2014
• Stamp duty to rise to a punitive 15 per cent for on sale of properties over £2m held by off-shore companies
• Economy on track with growth forecast revised slightly higher and marginal cuts to borrowing targets

13.56 Kiran Stacey, our political correspondent, reckons that was one of the Labour leader’s best performances yet in the Commons.

He had a list of potent attack lines on the 50p rate, the best of which was challenging the cabinet to admit whether they would benefit from the tax cut. But he could have made more of the tax rise for pensioners.

13.52 Ed Miliband has finished his response. That’s the Budget business of the day done in the Commons. Now the reckoning begins.

UK Uncut, a campaign group challenging the government’s austerity policies, weighs in.

There was a problem connecting to Twitter.

And here’s an acerbic take on the stamp duty reforms, via FT Money.

The British Chambers of Commerce appear distinctly underwhelmed too.

13.47 Miliband is determined to have this speech branded “the Millionaires’ Budget”. In a riposte to George Osborne’s joke about supporting the UK film industry — and thus Wallace and Gromit, to whom Miliband’s detractors suggest he bears a passing resemblance — the Labour leader says it would also be worth protecting Downtown Abbey:

A tale of out of touch billionaires who look like they’re born to rule but turn out not to be very good at it.

13.45 Ed Miliband turns his fire on Nick Clegg, the Lib Dem leader.

Only the Lib Dems could be dumb enough to think a George Osborne budget could be a Robin Hood budget.

13.42 As the Speaker demands that everyone cools off a little, some market reaction from Michael Hunter.

Markets have seen some positives in this Budget. As the Chancellor sits down the yield on the 10-year Gilt is down 3.3 basis points at 2.38 per cent, while sterling is down 0.1 per cent to $1.5842 against the dollar following worse than expected public finance data. The FTSE 100 has climbed off its lows to rise 0.1 per cent to 5,894.57.

13.37 Ed Miliband, the Labour leader is on his feet and looking to tear strips off George Osborne. Some nuggets:

What has he chosen to make his priority? For Britain’s millionaires, a massive tax cut.

He has failed the fairness test.

What planet are he and the prime minister living on?

The reality is: his plan has failed.

Last year told us unemployment would peak in 2011. We are into 2012 – unemployment is rising month on month on month.

He is borrowing over £150bn more than he said he would.

In the place of failure what does he offer? Not a change of strategy. We know the driving ambition of this budget was to deliver a tax cut for people earning over £150,000 a year.

Miliband’s refrain is that Osborne is favouring millionaires over “the squeezed middle”. Hands up in the cabinet if you are going to benefit from the income tax cut, he says, to a raucous reaction in the Commons.

13:32 KS: So what did we learn that we didn’t already know? Not much, but three important points:

1) There was no mention of if or when the top rate of income tax would fall to 40p
2) Tax reliefs will be capped at £50,000, rather than a specific measure capping pension contribution tax reliefs
3) Pensioners will have their personal tax allowances frozen, meaning they will fall in real terms.

13:31 And the speech is over… “This country borrowed its way into trouble, now it will earn its way out” concludes the chancellor, who sits down at 1.29pm.

13:30 Here’s the considered view from our economics team.

13:28 Markets team adds:  Extra duty on cigarettes was widely expected and the tobacco companies are broadly unaffected by the 37p on a pack of 20. British American Tobacco up 0.6 per cent and Imperial Tobacco up 1.4 per cent

13:27 From April 2013 personal tax allowance rises to £9,205, a rise of £1,100 from April 2012′s level of £8,105.

13:26 Child benefit – withdrawl of child benefit for households earning £50,000 or above will be gradual.  Those earning over £60,000 will lose all child benefit.

13: 25 Robert Shrimsley comments:

Osborne has convincing arguments on cutting the 50p rate but the optics are terrible. Voters will see the headline fact and few will bother with the explanations.  Furthermore, if it is such a good idea why wait a year to do it.

One can only imagine he has a better headline coming.

13: 24 Finally we find out…

From April 2013 the top rate of tax will be 45p in the pound

13: 20 Now for the big tax rates.

Income tax: Osborne says 50p rate paid by top earners  is the highest in the G20 and is widely recognised to harm the UK economy  – it has caused “massive distortions”

13:19 Stamp duty applied to residential properties above £2m bought by offshore companies raised to 15%.

From midnight – new stamp duty rate of 7% introduced on properties of over £2m.

New cap on tax relief of up to £50,000

Capital gains tax introduced on property held in overseas “envelopes” used to avoid stamp duty.

13:18 Fair fuel stabiliser remains at a price of £45 a barrell or $75 as previously announced.

Vehicle excise duty rising in line with inflation only and not at all for road hauliers rising as already announced.

Tax evasion and tax avoidance “morally repugnant”

13:16 Jamie Chisholm says:

That didn’t last long. 10-year gilt yields back to 2.41 per cent. Granted, these are pretty small moves and its probably the case that dealers are more interested in what’s happening with US Treasuries.

13: 15 Now for sin taxes.

Alcohol duty unchanged

Tobacco – duty on all tobacco products up by 5% above inflation from 6pm tonight – price of 20 cigarettes up 37p.

New machines game duty at 25% for gambling industry.

13: 12 Corporation tax to be cut to 24% from next month, 1% more than previously announced with target rate of 22% by 2014, as we reported.

Bank levy up to 0.105% from next January.

KS: We didn’t expect a separate bank levy to make sure banks don’t benefit from the corporation tax fall.

13: 11 From 2014 personal tax statements will show how much tax is paid and what it is spent on.  ”People will know what they are paying and what they are paying it for”

Research & Development – from next year there will be an above-the-line R&D tax credit for business,
13:10  Mark Odell, the FT’s transport correspondent, reacts to confirmation that the government is going to look at selling off the road network to try to emulate the private sector investment in the water industry.

The question is: can they make it work? Perhaps the Chancellor should read page 101 of his National Infrastructure Plan, which identified
that the regulated asset model used in the water industry wouldn’t work because this government has ruled out tolling on existing roads

On rail, the announcements on further electrification of lines around Manchester, not least to Nick Clegg’s Sheffield constituency, is
merely the government picking out more tasty morsels from Network Rail’s grand plan to double capacity across large parts of the rail
network in northern England. The owner of the network submitted the so-called £560m Northern Hub project as part of a detailed FIVE-year
spending plan from March 2014 last autumn.

13: 07 KS: The personal allowance has been frozen for pensioners to make sure it is the same as for anyone else – a big hit to pensioners.

13:06: Now for personal finances. Anomalies in VAT charges to be addressed but exemptions remain on food, drink and childrens clothes.

Basic state pension up by £5.30 a week next week, helped by simplified personal allowance rules. Government to introduce new single tier pension based on contributions at no extra cost to Treasury.

13:05 Markets update: Announcement of higher investment in media and technology drives chip designers higher – Arm Holdings up 1.5 per cent, Imagination Technologies up 3.4 per cent. Media group Rank climbs 2.7 per cent. BT Group climbs 1.1 per cent on commitment to raise broadband speeds.

13:04 KS: Osborne begins his tax reforms by invoking Adam Smith – trying to put a Tory branding on the package, one of the biggest parts of which will be the Lib Dem manifesto pledge to lift the personal allowance

13:03 Tax time: Taxes should be run along the lines advocated by Adam Smith, Osborne says: simple, predictable and support work, with the rich paying the most. Administration of tax to be radically reformed for companies with  turnover less than £75,000.

13:02 This will upset the unions. Chancellor confirms government looking at regional pay awards for public service pay.

13:01 Chancellor confirms Sunday trading laws will be relaxed for 8 weeks around  the Olympics.

The government is exploring the possibility of “enterprise loans” to help young people start their own businesses.

13:00 £50m for smaller cities to conntect to ultra-fast broadband. New funding for ultra-fast broadband roll-out in cities including Belfast and London as well as small conurbations.

KS: The Wallace and Gromit joke – picking up on Ed Miliband’s resemblance to the animated character – is Osborne’s first big joke at Labour’s expense.

12: 59 Best line of the speech so far: Film tax credit to be copied for games sector and television industry. “It’s the determined policy of this government that we keep Wallace and Gromit exactly where they are”

12: 58 Now for energy. Government will  look at case for reform of carbon reduction target introduced by previous government.

North Sea Oil – tax changes will follow to end the uncertainty over decommissioning.

Tax relief for new exploration in North Sea fields in Shetland

New UK centre for aerodynamics to be opened next year

12: 54 Turning to regional affairs. Government will work with the Mayor of London to extend the Underground, lengthen commuter trains and looking at new river crossings
London get a new £70m development fund to look at new investment opportunites.
There will be enhanced capital allowances for business start-ups in Scottish enterprise zones.

12: 51 Markets update: Builders jump to the top of the FTSE 250. Bovis Homes up 4.4 per cent, Barratt Development up 4.3 per cent, Persimmon 2.5 per cent .

12:50 Expanding export finance scheme to encourage Britain’s companies to enter new “emerging markets like Brazil and China”.

Government is working to develop London into a trading centre for China’s offshore currency

Robert Shrimsley adds: UK is building up its gold reserves: having sold low – we are now buying high, it seems

12:48 Debt management office to look at case for perpetual gilts.

UK gold holdings up to £11bn
Get Britain Building fund to be expanded
National loan guarantee scheme will offer £20bn of loan guarantees from banks including Barclays, Royal Bank of Scotland, Lloyds and Santander (UK) as well as new start-up Aldermore

12:47 News from our markets team. Jamie Chisholm says:

We have movement. And it’s not tumbleweed in Canary Wharf! 10-year gilt yields drop to 2.39 per cent, down 3 basis points. Low of the session after Mr Osborne gives debt/GDP forecasts

12:45 Turning to international affairs…

The cost of operations in Afghanistan, funded by the special reserve, will fall by £2.4bn over the life of this parliament. Rate of council tax relief doubled to 100% for families of serving military personnel. There’s an extra £100m for armed forces housing

12:43 More on welfare: White Paper on social care will address the growing cost of caring for the elderly and a review of the state pension age will be published in the summer.

KS: An automatic link between the pension age and average life expectancy is controversial: life expectancy differs hugely across the country and social classes.

12:42 KS: The welfare cuts are due to come later it seems: Osborne talks of £10bn cuts to the budget by 2016. This will be decided in the next spending round

12:42 Welfare budget is set to rise to account for one third of total spending. Overall borrowing for the next 5 years will be £11bn lower than forecast in the autumn

12:41 OBR confirms government on course to eliminate structural budget deficit by 2016-17. Proceeds of higher growth and lower borrowing will be used to pay down debt. Public borrowing will be £120bn next year, excluding the impact of the Royal Mail pension scheme – it will then fall to £98bn the year after, then £75bn, £52bn reaching £21bn in 2016.

12:40 Asset purchase facility to remain in place for the coming year.

Osborne says over a five-year period this is a fiscally-neutral Budget. OBR says national debt will peak at 76% of national income in 2014-15 before falling.

12:38 KS: First Tory cheers come for the well-predicted rise in the OBR’s growth forecasts for the UK. But 0.8 per cent still looks like stagnation, something Ed Miliband may point out later.

12: 38 Unemployment rate for next year revised down to 6.3% and revises its estimate of claimant count by 100,000 over the the next four years.

2012 inflation forecast is 2.8% and down to 1.9% for next year and then 2% thereafter.

12:36 Here come the numbers..OBR sharply revises down forecast for the euro area by 0.8 per cent and global growth by 0.2 per cent for 2012

OBR identifies spike in oil price is a threat but leaves growth forecast for this year unchanged at 0.7%. It expects UK economy to avoid technical recession and revises 2012 UK growth up to 0.8%.

12: 35 Budget will help industry, chancellor specifically mentions areospace, energy pharmaceticals, media and science. Osborne stresses that this is a Budget for “work” and “working people”. It could be that this is a precursor to cuts in the welfare budget…

12: 34 Here’s the big message: “Tax revenues from the wealthiest will increase”

12:33 Chancellor says the Budget “will reward work”.  The Budget reaffirms “unwavering commitment” to dealing with Britain’s debts and Britain will earn its way in the world with far-reaching tax reform.

12:32 The chancellor stands up to deliver his third Budget at 12.32pm

12:29 KB: The Tory Nick Boles tries to take credit for the rise in personal allowance, something that has infuriated the Lib Dems, who put the proposal on the front page of their 2010 manifesto.

12:28 Moments before the chancellor stands up, the yield on the 10-year gilt is down 2.2 basis points at 2.39 per cent, while sterling is down 0.2 per cent to $1.5825 against the dollar following worse than expected public finance data. The FTSE 100 is 0.1 per cent lower 5,885.76.

12:27 TB: Meanwhile, Occupy London has made its Budget day move, taking over a new site just weeks after its activists were evicted from St Paul’s.

In the shadow of Canary Wharf, set along the path of workers from the local financial services industry, Occupy Limehouse (corner of Branch Road and Horseferry Road, E14) has been chosen as an ideal location from which to carry on the Occupy movement’s critique of global capital. It is the first of a number of new autonomous
tented sites expected to pop up around the capital in the coming
months.

There was a problem with the blakbirdpie shortcode

12: 25 KS: One thing to watch today is what happens to the so-called “IR35″ tax rules, under which employees can be paid into a company, so avoiding income tax. A series of civil servants got into trouble for using this technique

Last month, and now Ken Livingstone, the Labour London mayoral candidate, has also got into hot water for it.

Freelance groups have been lobbying for the rules to be loosened, but Osborne may see a political gain in tightening them instead

12: 15 KS: Ed Miliband comes back to the dispatch box to ask about businesses getting money to carry out repairs after the riots. Something of a curve-ball there, but Cameron is unflustered, and trots out details of the separate funds being run to help businesses and speed up the process.

With fifteen minutes to go until George Osborne stands up, the markets are largely flat. Updates on the numbers to follow.

12:10 KS: Ed Miliband has decided to focus on Afghanistan at PMQs – an interesting tactic that seems to have killed the atmosphere and united both sides in solemn agreement. A good way to keep his powder dry for later perhaps.

12:05 Prime minister’s questions is now underway

12:00 Gavin Kelly, the chief executive of the Resolution Foundation, who was the driving force behind the move to levy a 5 per cent stamp duty on houses worth over £1m, explains why the move to increase the same tax today will be hated by economists:

Stamp duty is after all a tax on labour mobility (a key economic resource), so it keeps people living in places they’d rather leave and makes it less likely they will move to take new jobs (though how much of a barrier this will be to those in a position to fork out £2m is far from clear). And the way it is currently structured results in major distortions in the housing market as small increases in house price generate large leaps in the tax owed.

And yet stamp duty is a popular tax with politicians. Why so? In part because the revenue it raises have risen quickly with house prices. But also because it is judged to be a less painful tax to get the public to go along with compared to many others.

11.50 Kiran Stacey here, the FT’s political correspondent. PMQs is about to start in ten minutes – always a slightly strange occasion just before the Budget, but it should give us a glimpse of the likely Labour attack later on in the day. Things to watch for are:

Will there be a further cut in spending? If so, will it come from a department the Tories love to cut (welfare for example), or cobbled together from underspends elsewhere.

Will George Osborne set a date for the 50p rate to get down to its previous level of 40p? The Lib Dems have told him they will not accept such a move unless they get a mansion tax.

What will be done to tax pension contributions more? It could be a reduction in the annual cap or a cut in the amount of relief available for higher rate payers.

11.33 Here’s what to expect, courtesy of FT economics editor Chris Giles and our graphics maestros.

11.31 The Budget day wags are already out in force on Twitter…

11.25 The day has not started auspiciously for the chancellor. Chris Giles, the FT’s economic editor, reports:

Weak tax revenues in February and a surge in expenditure left the public finances looking significantly weaker than expected on Wednesday morning ahead of the Budget.

Revenues took a hit with weak income tax revenues, indicating lower bonuses in the financial sector and rich people taking action to avoid the 50p rate on incomes above £150,000, while public spending was unexpectedly strong, wiping out much of an undershoot in previous months.

The weak figures will provide George Osborne, the chancellor, with little room for manoeuvre in his Budget and suggest borrowing will not undershoot the £127bn expected in November by the Office for Budget Responsibility.

Chris’s full report is here.

For those seeking some more pre-budget reading, the FT’s A-List has just published a comment piece from Gavyn Davies. There are, he writes, reasons to see flickers of brightness in the economic heavens.

The pessimistic view is that private sector deleveraging is only just beginning, and will continue for a very long time as households bring the “excess” borrowing of the early 2000s under control. … A more optimistic view is that, actually, the private sector is in much better financial shape than is usually understood, and that this is the real silver lining which might be behind today’s dark clouds.

Davies also touches on one of the central questions for the UK economy in the long term — a poser that will not be answered today (emphasis ours).

Although the household sector as a whole might not have seen any deterioration in its net worth, there has been a large redistribution of wealth, away from young people and towards some older home owners.

This “jinxed generation” growing up with prospects worse than their parents’ is the subject of new FT research recently published.

11.00 Good morning. The biggest day in the economic calendar dawns with what George Parker, the FT’s political editor, expects to be “a return to raw politics” after years of budgets dominated by crisis measures.

To get us started, here is George’s authoritative take on how the Conservatives and their Liberal Democrat coalition partners hammered out the spending plans.

Ever since the collapse of Northern Rock in 2007, chancellors have arrived at the despatch box every year against a backdrop of economic crisis, the red ink virtually dripping from their red Budget boxes. This year growth forecasts are slightly up and the public finances slightly less awful than expected.

With the fiscal path set and the economy stable – if stagnant – Mr Osborne’s Budget offers a fascinating glimpse into the political priorities of the coalition.