George Osborne pledged to share the benefits of economic recovery with pensioners and savers today as he delivered his penultimate Budget before the general election.
The Chancellor unveiled radical reforms to tax rules on retirement pots and new-style flexibile ISAs where people can save up to £15,000 without the Treasury taking a cut, and he pushed up the personal income tax allowance to £10,500 next year.
And he made the case against independence by suggesting that falling revenues from North Sea oil would leave an independent Scotland £1000-a-head worse off.
Hailing the success of the coalition’s austerity programme, Mr Osborne said UK plc would grow by a better than forecast 2.7% in 2014 and the government would be back in surplus by 2018-19.
He also offered some crowd-pleasing items including scrapping the duty escalator on wine and spirits, a penny off a pint of beer, and freezing the “carbon floor” price in a bid to take £15 off consumers’ energy bills.
“The message from this Budget is: you have earned it; you have saved it; and this government is on your side, whether you’re on a low or middle income, whether you’re saving for your home, for your family or for your retirement,” Mr Osborne told MPs.
“The forecasts I’ve presented show: growth up; jobs up; and the deficit down.
“With the help of the British people we’re turning our country around. We’re building a resilient economy.
“This is a Budget for the makers, the doers, and the savers.”
But Labour leader Ed Miliband responded: “The Chancellor spoke for nearly an hour but he did not mention one central fact: the working people of Britain are worse off under the Tories.”
The Chancellor said the Government had “held its nerve” and was able to deliver a boost to pensions and savers because the economy was performing better than expected.
The Office for Budget Responsibility (OBR) now predicts the UK economy will grow by 2.7% - up from its previous estimate of 2.4%.
“I can report today that the economy is continuing to recover - and recovering faster than forecast,” Mr Osborne told MPs.
“We set out our plan. And together with the British people, we held our nerve. We’re putting Britain right.
“But the job is far from done. Our country still borrows too much. We still don’t invest enough, export enough or save enough.
“So today we do more to put that right. This is a Budget for building a resilient economy.
“If you’re a maker, a doer or a saver: this Budget is for you.
“It is all part of a long-term economic plan - a plan that is delivering security for the people of this country.”
Mr Osborne said this financial package would ensure that “hardworking people keep more of what they earn - and more of what they save”.
“Yesterday we set out our support for parents with tax-free childcare,” he said.
“Today support for savers is at the centre of this Budget, as we take another step towards our central mission: economic security for the people of Britain.”
He said the OBR was forecasting that the economy would surpass its pre-crisis peak later this year.
The OBR was forecasting the deficit would be lower than expected this year at 6.6% - and the Government will post a surplus of 0.2% in 2018/19.
“There were those who said repeatedly that the deficit was going to go up.
“Instead I can tell the House that the Office for Budget Responsibility have revised down the underlying deficit in every year of their forecast,” Mr Osborne said.
Mr Osborne told MPs: “The economy is continuing to recover and recovering faster than forecast.”
He said the effect of the upgraded growth forecasts meant the size of the economy would be £16 billion bigger than was predicted four months ago.
The Chancellor said no major economy in the world was growing faster than Britain - with growth ahead of Germany, Japan and the US.
Mr Osborne also said the OBR was now predicting earnings to increase faster than inflation this year - meaning workers will finally start to see their pay packets grow in real terms.
The Chancellor said the country still “borrows too much” but added: “As a nation, we are getting on top of our debts.”
He said the new fiscal forecasts meant Britain would be borrowing £24 billion less than was last forecast, more than the annual budget for the police and criminal justice system.
The Chancellor sparked wildly different reactions from industry and unions, drawing praise and criticism.
Business groups welcomed measures to cut energy costs and promote manufacturing, but unions attacked the “obsession” with austerity.
Paul Kenny, general secretary of the GMB, said: “This Budget reeks of the stuck-up complacency of the well-heeled elite.
“Osborne’s claim that the economy will get back to pre-recession levels this year is sadly not the case. GDP per head is still 5.7% down on 2007 and real value of average earning is also down 13.8%. There is a very long way to go to get living standards for the vast majority of workers back to pre-recession levels.
“The Budget is doing very little to get the 912,000 unemployed aged 16-24 into proper jobs. As some 246,000 have been out of work for over a year, there is a grave danger of seeing a lost generation.”
Public and Commercial Services union general secretary Mark Serwotka said: “This Government’s obsession with austerity is causing misery for millions of people while the over-hyped economic recovery benefits only a wealthy few.
“Instead we need free universal childcare so parents can afford to return to work, a living wage and an end to pay cuts, and proper investment to create sustainable jobs and build the homes to tackle the scandal of our housing crisis.”
Mike Benner, chief executive of the Campaign for Real Ale (Camra), said: “Camra is delighted to see the Chancellor implementing an unprecedented second consecutive cut of 1p in beer duty. This is not only about keeping the price of a pint affordable in British pubs but helping an industry which has been in overall decline continue on its long road to recovery.
“Camra cares greatly about the future of the great British pub and it is clear from this Budget announcement that the Government do too.
“Keeping the price of a pint affordable is vital for the long-term health of the pub sector and Camra would hope this latest vote of confidence in British pubs will go some way to slowing the rate of closures, by encouraging more people to make use of their local this summer.
“No doubt many of our 160,000 members will be raising a glass to the Chancellor this evening to toast another brilliant Budget for British beer drinkers.”
Dave Prentis, leader of Unison, said: “The Chancellor has run out of time and ideas. His claims that people are feeling the benefits of his austerity agenda are wearing thin. The public are not fooled, they know that the gap between the rich and poor is dividing society.
“They know that their pay has failed to keep pace with the rising cost of everyday essentials such as food and fuel. And they know that fears over job stability are making them fearful for the future and the future of their families.
“Unison members will see through the Chancellor’s Budget for what it means - at least another four years of pain for little gain.”
AT A GLANCE
- “Precarious” future for North sea would leave independent Scotland with a shortfall of £1000 per person, says Osborne, adding: “We’re better together.”
- Alcohol duty escalator scrapped. Mr Osborne says he will freeze duty on whiskey and ordinary cider.
- Beer duty will be cut by one pence, Mr Osborne says. “Pubs saved. Jobs created. A penny off a pint for the second year running,” he adds.
- Tobacco duty has been rising by 2% above inflation and will do so again today,” he says.
- Fixed odds betting terminals in bookies will now be taxed at a higher rate of 25%.
- Mr Osborne says the number of bingo halls has “plummeted” by three quarters over the last 30 years and so bingo duty will be halved to 10%.
- Additional £140 million made available for repairs and maintenance to flood defences
- Additional £200 million for potholes
- Cash and stocks and shares ISAs will be merged into one New ISA. The annual limit for saving in an Isa will be raised to £15,000.
FACTS AND FIGURES
- The Office for Budget Responsibility (OBR) confirms economy grew by “three times as much” as forecast 0.6% in 2013
- The OBR predicts 2014 GDP growth of 2.7%, then 2.3% in 2015, 2.6% in 2016 and 2017 and 2.5% in 2018
- Revised GDP figures mean UK economy will be £16 billion larger than OBR forecast four months ago
- Deficit revised down to 6.6% this year, 5.5% in 2014/15 then 4.2%, 2.4% and reaching 0.8% in 2017/18 with a surplus of 0.2% in 2018/19
- Borrowing expected to be £108 billion this year - £12 billion less than forecast a year ago
- OBR predicts borrowing will fall to £95 billion in 2014/15, then £75 billion, £44 billion and £17 billion in subsequent years with a surplus of almost £5 billion in 2018/19
- Forecasts mean the UK will borrow £24 billion less than previously predicted over the period
- Debt is revised down to 74.5% of GDP this year; then 77.3% next year, reaching a peak of 78.7% in 2015/16 and falling to 78.3%, 76.5% and 74.2%
- £42 billion saving on interest payments expected in the following years
- OBR forecasts 1.5 million more jobs over the next five years and earnings to grow faster than inflation
- Welfare cap set at £119 billion for 2015/16, rising to £127 billion by 2018/19, only state pension and cyclical unemployment benefits excluded
- Compliance checks on migrants claiming benefits they are not entitled to; saving £100 million
- People signed up to disclosed tax avoidance schemes to pay taxes upfront
- Tax avoidance measures to include increase in HMRC budget for non-compliance and increased tax credit debt recovery rates
- Tax on homes owned through companies to be extended from homes worth more than £2 million to those worth more than £500,000
- 15% stamp duty on homes worth more than £500,000 bought through companies
- Libor fines to fund search and rescue and lifeboats and provide £10 million to scouts, guides, cadets and St John Ambulance.
- Inheritance tax waived for emergency services personnel who “give their lives protecting us”
- VAT waived on fuel for air ambulances and inshore rescue boats
- Housing policies announced today to support more than 200,000 new homes.
- £270 million guarantee approved for the Mersey Gateway bridge.
- Legislation to give Welsh Government tax and borrowing powers to fund infrastructure needs
- Business rate discounts and enhanced capital allowances in enterprise zones extended for three more years; first Northern Ireland enterprise zone to be established near Coleraine
- Research and development tax credit for loss-making small businesses raised from 11% to 14.5%; social investment tax relief at 30%
- Annual investment allowance doubled to £500,000 and extended to the end of 2015
- From September, 20% tax relief for theatre productions, and 25% for regional touring
- 2% increase in company car tax to be extended through to 2018; increased discount for ultra-low emission vehicles