BUDGET BRIEFING JULY 2015
OVERVIEW This may have been the first Conservative Budget since Ken Clarke had the honour of standing at the Despatch Box back in November 1996, but it was delivered by an exceptionally experienced Chancellor of the Exchequer. In a speech lasting over an hour, George Osborne effectively balanced the bitter pill of welfare reform with a range of headline-grabbing initiatives.
Dubbed as a productivity Budget, Shadow Chancellor Chris Leslie was quick to point to page 77 of the OBR report, which stresses productivity continuing to stagnate during the course of this Parliament. The challenge will be whether any of today’s announcements, whether on roads or apprenticeships, will have an impact on this challenge.
This was a Budget that aimed to set the debate for the coming Parliament, simply by promising to ‘give you more of your money if you are willing to work.’ For weeks now, speculation has focused on welfare reform - and reformed it was. A long list of changes included tax credits and housing allowance being frozen, a reduction in the benefit cap, limits in Child Tax Credits and conditions on the Universal Credit system. This reform was complemented by big announcements on the National Living Wage, an increase in the Personal Allowance and reform of inheritance tax.
If I were to pick an obvious winner from today’s Budget, it would be the banks. After months of wrangling around the bank levy, the Chancellor finally set the policy on course for reform. The unfortunate losers were students. After the tuition fees increase in the last Parliament, the conversion of maintenance grants into loans is not going to go down well.
Gurpreet Brar, Managing Director
Partner Analysis by The UK is getting a pay rise. The headlines will be dominated by the £9 an hour that employers will have to pay their staff by 2020, and despite the idea being raised in the press by two of Cameron and Osborne’s former advisers in recent weeks, it is the undeniable rabbit out of the hat. Coming at the end of the speech, and following long explanations of how tax avoidance will be reduced, welfare savings will be found, and the devolution agenda enhanced, the Chancellor ensured that the debate will focus squarely on the traditional Labour territory of in-work poverty. Over the coming days expect reams of analysis of how the package of measures will play out, as it is the interaction of changes made to tax credits, the Benefit Cap, Housing Benefit, Employment and Support Allowance and income tax thresholds which will largely determine who the winners and losers are from this Budget.
The “Long Term Economic Plan” mantra was replayed again today, providing the backdrop to these changes, but the crucial aspect of economic performance that will dictate by how much workers’ pay and the public finances will improve in the longterm is that of productivity. George Osborne gave nods to the need to better train our workforce, build better infrastructure, liberalise planning and get businesses to invest, yet there was scant detail. The announcements on funding for roads, apprenticeships and tax incentives for company investment are a good base – the Chancellor has five more years to add to it.
Steve Hughes, Head of Economic and Social Policy
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