| Chancellor of the
Exchequer George Osborne billed his second
Budget as a “Budget for growth”, telling
MPs that it was an “urgent call to action
for Britain”. His main ambitions, he said,
were to ease the economic burden on
families and businesses while promoting
Britain as the best place to do business
in Europe.
Summary of key proposals
- Consultation on plans to merge
income tax and National Insurance.
- Tax-free personal allowance
increased by £630 to £8,105 from April
2012.
- Corporation tax to be cut by two per
cent in April 2011 – more than the one
per cent previously announced.
- Forty three tax reliefs to be
scrapped as part of the simplification
of the tax code, along with £350 million
of business regulation.
- Business rate relief holiday for
small firms extended for another year.
- Bank levy to be adjusted so that
banks do not pay less tax.
- Ten per cent discount on Inheritance
Tax for those who leave 10 per cent of
their estate to charity.
- Direct tax rates to be indexed to
Consumer Price Index (CPI) from 2012.
- Funding for 40,000 new
apprenticeships for unemployed young
people and 100,000 new work experience
placements.
- Twenty one “enterprise zones” to be
launched, backed by tax incentives.
- No new regulation on firms with
fewer than 10 staff for three years.
- Tax loopholes to be closed to raise
£1 billion this year.
- Fuel duty cut by 1p per litre from
6pm on 23 March. Planned 4p per litre
rise due in April delayed until 2012.
Annual fuel duty escalator scrapped
until 2015. No reduction in VAT on fuel.
Tobacco tax up by two per cent from 6pm
on 23 March but no increase in alcohol
duty.
- Council tax to be frozen or reduced
this year in every English local
authority.
Setting the scene
Mr Osborne laid out his cards on the
table from the start, telling Parliament
that “the size of the task of repairing
Britain’s finances is unchanged”. However,
while this year’s Budget was not about
raising taxes, neither was it about
“giveaways”, he said. Instead, the 2011
Budget was about “sound money” and
encouraging enterprise, export and
manufacturing, while also easing the
burden for families who were struggling to
cope financially.
Britain had lost ground in the world’s
economy, he said, and needed to catch up.
The Chancellor said Britain needed to
become an attractive place to do business
– both for overseas companies and for new
start-ups.
Mr Osborne also revealed that the
growth forecast for Britain in 2011 had
been downgraded from 2.1 per cent to 1.7
per cent. The following years had also
been downgraded to 2.5 per cent for 2012,
2.9 per cent for both 2013 and 2014, and
2.8 per cent for 2015. This was due to a
0.6 per cent contraction in the last three
months of 2010.
Inflation would remain at between four
and five per cent this year, but was
expected to fall to two per cent by 2013.
The borrowing forecast was also not as
high as previously predicted by the Office
for Budget Responsibility. Figures now
show this to be £146 billion for this
year, rather than the original £148.5
billion. This would go down to £29 billion
by 2015/16, Mr Osborne said.
Duty
Having been under pressure not to
increase fuel duty, which was due to go up
by 4p a litre from April this year, the
Chancellor instead cut it by 1p per litre
as of 6pm on 23 March. The annual fuel
escalator was also scrapped until 2015.
The cuts will be paid for by a £2 billion
tax, known as the Fair Fuel Stabiliser, on
North Sea oil producers. This is a
supplementary charge which will increase
the tax paid on oil and gas production
from 20 per cent to 32 per cent. There
will be no reduction in VAT on fuel.
There was no further increase in
alcohol and air duty, but tobacco tax was
increased by two per cent from 6pm on 23
March.
Income tax
The tax-free personal allowance on
income tax will be increased by a further
£630 to £8,105 from April 2012. This is in
addition to the £1,000 increase announced
during last year’s Emergency Budget, which
comes into effect from April this year. Mr
Osborne said the 2012 increase would save
25 million people around £45 a year. The
measure will affect anyone earning less
than £115,000 a year.
Direct tax rates will be indexed to the
Consumer Price Index (CPI) from 2012.
Income tax relief on the Enterprise
Investment Scheme will increase from 20
per cent to 30 per cent from April 2011.
There were no personal tax increases.
The 50 per cent top tax rate will remain,
but this will be reviewed to see how much
it raises.
Mr Osborne also revealed that a
consultation is to take place into a
long-term plan to merge income tax and
National Insurance, saying that having two
separate taxes imposed unnecessary costs
on many businesses.
Business and enterprise
Mr Osborne announced that corporation
tax will be cut by two per cent in April
2011. This is a bigger reduction than the
one per cent originally planned.
Tax simplification also played a
leading role in the Budget, with 43 tax
reliefs being scrapped by the Chancellor
following recommendations from the Office
for Tax Simplification.
There was also a boost for small firms,
with a moratorium on new regulation for
firms with fewer than 10 staff for three
years. The business rate relief holiday
for small firms will also be extended by
another year until October 2012.
Entrepreneurs’ relief will be doubled
from £5 million to £10 million from April,
while capital allowances will be doubled
from four years to eight years in a bid to
encourage more investment in new
equipment.
Research and Development tax credits
for small businesses will be raised to 200
per cent this year.
Twenty one new “enterprise zones” will
be launched, backed by tax incentives,
while new rules will require planners to
prioritise jobs and growth when making
planning decisions.
In terms of jobs and skills, there will
be funding for a further 12 university
technical colleges, as well as 40,000 new
apprenticeships for unemployed young
people and 100,000 work experience
placements.
Science facilities will also receive a
£100 million funding boost.
Housing and mortgages
Mr Osborne pledged £250 million to help
10,000 first-time homebuyers purchase
newly built flats and houses in England.
The scheme, which will be funded by
profits from the bank levy, will involve
the buyer putting up five per cent of the
cost while the Government and home builder
would both put up 10 per cent. The move is
also aimed at boosting the construction
industry.
A scheme to help out-of-work homeowners
with mortgage arrears, introduced by
Labour, will also be extended.
Council tax will be frozen or reduced this
year in every English local authority, Mr
Osborne announced.
Benefits and working families
Mr Osborne said that help would be
available for families “who do pay their
taxes but struggle with the daily costs of
living”. This will come through the
council tax freeze, more child tax credit
for lower income families and a “pay lift”
of £250 for public servants on incomes of
less than £21,000.
Pensions and retirement
Mr Osborne branded Britain’s pensions
system “unbelievably complex”. He said the
long-term aim was for a £140 per week
flat-rate state pension. This would not
apply to current pensioners.
Tax avoidance
Three forms of Stamp Duty Land Tax
loopholes will be among those closed by
the Treasury in a move expected to raise
£1 billion each year. Capital allowances
would also be “tightened” to “shut down
open abuses”, said the Chancellor.
Charities
Gift Aid will be “dramatically
simplified” with the introduction of an
online filing system in 2013.
Mr Osborne said changes would be made
so that Gift Aid could be claimed on
donations up to £5,000 without the need to
fill out forms or envelopes. This would
see 100,000 charities benefit from £240
million, he said.
The environment
The Chancellor pledged an extra £2
billion of funding for a “Green Investment
Bank” offering incentives for investment
in green technology, to be launched in
2012.
A carbon price floor will be introduced
for the power sector in the UK.
Official documents from George Osborne’s
2011 Budget
View full Budget Report 2011 |
