Budget 2014: for ‘makers, doers and savers’

Savers

Mr Osborne said support for savers was “at the centre of this budget, as we take another step towards our central mission – economic security for the people of Britain”.

He said tax-free cash and equity individual savings accounts (ISAs) will be merged, with the annual limit increased to £15,000, pensioner bonds will be introduced in January, and the premium bond limit will be increased from £30,000 to £40,000 a year.

Mr Osborne said the 13 million people paying into a defined contribution pension will no longer have to buy an annuity, tax restrictions on pensioners’ access to their own pension pots will end, and tax on cash taken out of pension pots at retirement will fall from 55 per cent to 20 per cent.

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Economy

Mr Osborne said he was presenting “a budget for a resilient economy”, illustrated by a “resilient pound coin” – the new thruppeny bit-style currency unveiled on Wednesday morning that will replace the pound coin.

With unemployment falling by 63,000 in the three months to January and the economy performing better than expected, he announced that the independent Office for Budget Responsibility (OBR) now forecast that growth would rise by 2.7 per cent in 2014 (up from 2.3 per cent) and 2.3 per cent in 2015.

He said Britain was growing at a faster rate than the US, Germany and Japan and the OBR was forecasting that the economy would surpass its pre-crisis peak later this year.

“But the job is far from done. Our country still borrows too much. We still don’t invest enough, export enough or save enough,” said Mr Osborne.

“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.”

Deficit

The chancellor said that despite the fact the economy was growing, he would not let up on cutting the deficit – the gap between what the government spends and raises in taxes.

It is taking him longer to deal with the deficit than he expected, due to the length of the downturn, but he said it would be cut by a half in the coming year.

The government will also seek the support of parliament in a vote for a deficit reduction path leading to further spending cuts in 2014 and 2015 and following the general election.

Mr Osborne said the government would be back in the black by 2018, with the OBR predicting a 0.2 per cent budget surplus in 2018/19.

Welfare cap

George Osborne had already introduced a benefits cap: a limit on how much a family can claim in welfare. He went further in his budget speech, announcing a cap on the amount that can be spent by government on welfare, excluding pensions and cyclical unemployment benefits.

Mr Osborne said the cap would be set it at £119bn in 2015-16, putting pressure on Labour to say what it would do about Britain’s welfare bill.

Personal allowances

Mr Osborne announced that the tax-free personal allowance, the amount of money that can be earned before 20p tax is paid, willl rise to 10,500 in 2015.

It was already due to rise from £9,440 to £10,000 in April.

40p tax rate

Mr Osborne was under pressure from some Conservative MPs to take action on so-called “fiscal drag”: the million-strong increase in the number of people paying tax at 40p.

He did so, announcing that the threshold at which 40p tax is paid would rise from £41,450 to £41,865 next month and £42,285 in 2015.

standards down, month after month, year after year.”

Fuel duties

The fuel duty rise planned for September will not take place.

Sin taxes

Duty on tobacco will continue to rise by 2 per cent above inflation during the next parliament.

Duty on alcohol will rise in line with inflation, with exemptions for whisky, beer and west country cider.

Childcare

The chancellor repeated the coalition’s pledge, announced on Tuesday, for more generous tax breaks for parents paying for childcare.

A new scheme, due to come into force from the autumn of 2015, will be worth up to £2,000 per child, compared with the £1,200 originally proposed.

North Sea oil

Mr Osborme said the government would take forward all of the recommendations in the Wood report on North Sea oil and gas, but he added that the OBR had revised down its forecast for tax receipts from the North Sea by £3bn.

Labour’s reaction

Before the speech, Labour leader Ed Miliband said voters should expect “a Tory budget that claims our economy is fixed while families are £1,600 a year worse off”.

He said in the Commons: “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. Living standards down, month after month, year after year.”

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