There was good news for the Chancellor of the Exchequer, George Osborne, prior to his 2014 Budget speech at the Commons. The Office for Budget Responsibility increased its forecast for 2014 GDP growth from 2.4% to 2.7%; unemployment fell by 63,000; and average weekly earnings rose by 1.3% (excluding bonuses) on an annual basis in the three months to January, and by 1.8% in January itself.
And as for the Budget itself? Here’s a summary all of the day’s major talking points…
The Chancellor was particularly pleased to announce the governments scheme to boost Britain’s exports. The amount of finance available to exporters will be doubled from £1.5bn to £3bn. It is a welcome boost to an area of the British economy which is among the weakest and a rise in exports will certainly help to create a more resilient and balanced economy. But it will take a lot more if Osborne’s personal target of £1trillion in exports per year is to be reached by the end of the decade.
The majority of the budget’s details regarding the housing market have trickled out over the past few days. The chancellor announced a couple of days ago that his controversial Help to Buy scheme will be extended for another four years until 2020. Shares in British house builders rose sharply following the news earlier in the week. The new ‘garden city’ planned for Ebbsfleet – comprising over 15,000 new homes – was also confirmed in the budget speech (alongside plans for 200,000 new homes across the country), and is largely expected to be funded by first time buyers through Help to Buy.
The bigger housing market announcement came in the shape of another finance package. £500 million has been made available for housing construction in a bid to sustain the growth of the housing market, and offset the potential of a housing bubble caused by Help to Buy, or any other trigger.
Manufacturing and Annual Investment Allowance
British manufacturers have received a healthy boost with the government promising a £7bn package to cut energy bills for manufacturers. The Annual Investment Allowance – which was due to expire this April – has been doubled to £500,000 and been extended to 2015.
These are both timely schemes which will certainly help to balance the economy, in what is for the large part, an undramatic but very sensible budget.
The Chancellor was also able to call upon the deficit projections of the Office for Budget Responsibility, to add to the positive growth forecasts. The deficit was 11% of GDP in 2010 – at the start of austerity – but will fall to 6.6% this year. This is expected to gradually decrease year on year until 2018-19, with the deficit being replaced by a small surplus of 0.2% .
This projection, of course, depends on the economy continuing to grow at the projected rate, and does not account for any jolts which may be delivered in the next 5 years.
The threshold for earnings on income tax is due to rise to £10,000 this April following the 2013 budget. The chancellor announced today that this will increase again next April to £10,500.
ISA’s and Savings
Cash Isa and shares Isa accounts will be merged into one single Isa account type, with the annual deposit limit increased to £15,000 per year. This is intended to help the savers who’s profits have suffered as a result of the Bank of England’s 0.5% interest rate, meaning the average cash Isa account only has a 0.8% rate. The 10 pence rate of tax for income on savings has been completed scrapped by the government, in a further attempt to reward savers.
New Pound Coin
After 35 years in circulation, the £1 coin will be replaced in 2017 by a completely new incarnation. The £1 coin is said to be very vulnerable to counterfeit, as 1 in 30 pound coins are forged. The new coin will be highly secure, and far less susceptible to forgery. The chancellor informed the Commons that it will be ‘a more resilient pound for a more resilient economy’.