Budget 2011 Paraphrased

Budget 2011 In Depth ....  Paraphrased but pretty much as the Chancellor said it .....

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"Reform economy for enduring growth and jobs for the future
Help families with cost of living and high price of oil
Difficult for people living in the UK at the moment
Set off now on a plan of rescue to reform to recovery
Need stability for sustainable growth and new jobs
Inherited record budget deficit but dealing with it with difficult measures and have already asked the hard things from the British public so today we do not need to ask them for more.

This is not a tax raising budget - it is a budget that encourages enterprise, supports export, manufacturing and investment.  Its about making things, not making things up.

"Britain has a plan and we are sticking to it."

Britain has a higher deficit than Portugal, Greece and Spain but we do not have their level of interest rates (12% in Greece) but the same interest rates of Germany.  Stability, credibility and lower interest rates is what we have achieved.  

Stability is not enough so in addition today we are publishing our plan for growth, Britain has lost ground in world’s economy.  The country gambled on a debt fuelled model of growth that failed and it cannot afford to go on.  We must earn our way in the modern world.

Last November the Government said recovery would be more challenging but that based on independent forecasts the economy would grow in 5 yrs and employment would rise.  That remains the case based on the independent forecast published today by the Office for Budget Responsibility.  Unlike the old days where Chancellors made the figures fit the Budget, now the Budget has to fit the figures.  Based on this the OBR has been made a permanent fixture and received royal assent yesterday.

Growth forecasts
2011 revised to 1.7%.  The OBR said that was specifically due to weaker than expected last quarter growth, higher inflation and higher commodity prices.  The effect of this is to create scope for greater growth in later years.
2012 2.5%
2013 2.9%
2014 2.8%

The European Commission has published growth forecasts for the UK and says that it will grow more next year than Spain, Italy and France and above the overall average of the European Union.  

Inflation is expected to be 4% and 5% this year, 2.5% in 2012 and then 2% in 2013.

The Government believes the UK’s foreign currency reserves are too low and intends to rebuild them by purchasing high quality assets.  George made the snipe that they could not buy gold at its current record high price because it was sold at a record low price.

Debt and Deficit
Borrowing will be £146bn and then fall to £122bn in 2012, £101bn in 2013, £70bn in 2014 and £29bn in 2015.  

National debt as share of national income will be 60% this year, then 71% and reaching 60% by end of the period.

We have to compete if we are going to create jobs and grow the UK.  We have gone from 4th to 12th in the global competitiveness league.

This is an urgent call for action – we need private sector growth and prosperity across all areas - not just London.  

We have a vision for growth – difficult decisions and major reforms are needed but otherwise we would suffer from economic decline and dropping living standards for our families.

We want the most competitive tax system in the G20
We used to have the 3rd lowest corporation tax rate in Europe, now we are 6th highest.
Tax should be efficient and support growth.  It should be certain, predictable, simple and reward hard work and ask the most from those who can afford the most.

Welfare payments and public service pension will be uprated with CPI from April but we have decided that all direct taxes will be uprated with CPI and that will spread out to all indirect taxes when the fiscal position allows.

Income tax and National Insurance as 2 different taxes work on two differenty systems and have 2 different charging periods.  That is totally unnecessary and puts burden and cost on employers and also the taxpayer, based on the burden on HMRC.

We are consulting to merge both taxes and simplify their operation.  It will take a number of hears to complete bit it will simplify the tax system and make it fit for the modern age.

We are going ahead with the tax rate on profits on patents, reforming Controlled Foreign Companies rules to make us ultra competitive with a rate of 5.75% on overseas financing income.

Corporation Tax will be reduced by 2% this year and then 1% again in each of the coming 3 years.  That will give us the lowest rate of Corporation Tax in the G7.

This is not a net tax cut for banks – we will be adjusting the bank levy next year to offset its effect.

Best place to start, finance and grow a business
We are not there today – Germany, Finland and Netherlands have overtaken us.  

We are taking action.  We will amend the Equality Act on dual discrimination rules, amend no win no fee legal services that restrict and prey on employers.

There will be a morarotium introduced so that all existing companies and new start up businesses with less than 10 employees will be exempt from new domestic regulation for the next 3 years.  

We also plan to tackle the planning system to ensure that all bodies involved in planning prioritise growth and jobs and favour sustainable development.  Existing controls on greenbelt will continue.

Bad regulation stands in the way of new jobs and so does the shortage of finance.

We have agreed with banks for small businesses a 15% increase in the availability of credit.

Enterprise investment scheme tax relief will rise in April from 20% to 30%.  Also doubling the amount that can be invested in EIS from next year, increasing the size of the company that can invested in.

Start up Britain – a scheme run for entrepreneurs by entrepreneurs.  With effect April this year Entrepreneur Relief will increase to £10m.  Let us be the home of enterprise.

Non domiciled individuals in the UK are welcome but they should pay for their special tax status.  The previous Government introduced a fee of £30,000 for people who had lived in the UK for 7 years or more.  We are now introducing a higher charge of £50,000 for non-doms who have lived in the UK for 12 years to raise an additional £200m in the coming years.

The tax charge will be removed when income and gains are remitted to the UK to invest in British business.

There will be no further changes for non-dom taxation during this Parliament.  

The 50% tax rate was introduced as a temporary measure only and this Government intends to keep it that way.  It is not permanent but now would not be a good time to remove it altogether.  It is more sensible to see how much revenue is raised by the 50% tax and HMRC will be letting Government know.  Tax must be fair and the wealthy should pay more than others and not be able to avoid tax.

Tax on high valued property sees evasion and avoidance.  The problems are widespread and Government is redoubling efforts to find a way to ensure that high value property owners pay their share.

Balanced economy re exports and investment
Government intends to reform the burdensome Money Laundering regulations in the UK.

The Small Business Rate Relief was due to end in October this year but Government has decided to extend the scheme for a further year to reduce the pressure on the smallest businesses.

In the construction industry, stamp duty will now be levied on the mean value not bulk cost.

Home ownership is a real problem at the moment in the UK.  Government has decided from the proceeds of the bank levy for this year to commit £250m to help 1st time buyers.  A shared equity scheme will be implemented for the purchase of new properties to help those who cannot afford the deposits.  This will help 10,000 families onto the housing ladder.  

The Support for Mortgage Interest Scheme will also continue for another year to reduce arrears for out of work home owners and their mortgages.

Manufacturing in the UK has fallen by half over the past few years.  But, over the past 3 months it has grown at a record rate.  To help it continue government is launching incentives to help manufacturing become more entrepreneurial.  The science budget has been protected from cuts and an extra £100m is now being made available for new science facilities.  If we are to be come innovative must have it in business.  

From April 2011 small companies research and development credit will rise to 200% and 225% next year.  Supporting the private sector is crucial

The Government is to help councils repair winter potholes with an additional £100m set aside for them.

Government wants to help all parts of our country succeed.

21 new enterprize zones have been launched today throughout the country, with one in London too.  The Mayor of London will decide which area is to be designated but Government want a strong focus on manufacturing in urban areas with the highest need but also the greatest potential.

Northern Ireland taxes are to be reviewed and may have a lower rate of Corporation Tax than the rest of UK.

Government intends to help families particularly in the South West with the cost of high water bills.

The Government want to be the greenest government ever and they are determined to be just that.  A green energy revolution.

The Green Investment Bank has been created today with £3bn committed to it.  It will be funded by asset sales and backed by the Treasury.  Starting in 2012 it will focus on green project investments.  Government will ensure the green investment bank will invest in a better greener future.

Educated flexible workforce
The UK has lower skills than America, Germany and France.  We need to reform schools and universities and support early years children from lower income backgrounds.

Government is introducing new university technical colleges offering vocational training for 13 to 19 year olds.  12 have been announced but Government will double that to 24.

Youth unemployment has been rising for 7 years and Government is looking to make available more places for work experience and apprenticeships.

There will be a total of 250,000 more apprenticeships over the next 4 years to offer real training, secure jobs and growth.

Government is looking to include more automatic increases to the State Pension age, based on independent reviews of when it is necessary.  Be warned, it is going to increase.  State Pension age rises to 66 in 2020.

Public service pensions need to be fair to those working in the sector and also to the taxpayer.  The discount rate agreed would be inflation plus GDP growth which would mean employee contributions increasing by 3%.  Government is not proposing to ask for more than 3% employee increase in contributions.

With pensions, there is to be no cherry picking.  Government is also asking for changes to MP’s pensions and also the State Pension system.  Talk of a single tier, flat rate pension based on contributions is expected but it will cost no more than the current system.  The planned rate is £140 per week but it will not apply to existing pensioners and it will take years to come into effect.

Contracting out is abolished in 2012 and this will mean that some people who would have got more as a result of contracting out will now be restricted to this flat rate pension.

Government is simplifying Gift Aid and making charitable donations.  Charities will not have to submit individual forms for every donation by 2013 and measures are being put in place to encourage wealthy people to make more donations.

For example, if you leave 10% of your estate or more to charity on death then you will receive 10% off your IHT rate.  Only the charity will be better off,you’re your beneficiaries.

Charities will also benefit from a better system for the smallest donations.  Gift Aid can be claimed on up to £5,000 per annum per charity without them having to fill out a form for each donor.  This makes it easier for the buckets and boxes donations to gain relief too.

To help families, all local authorities are freezing council tax in the coming year.  

The Personal Allowance will increase by £1,000 to £7,474 in April and again to £8,105 in April 2012.

The planned Air Passenger Duty rise will be delayed from this year to next year.

Alcohol
Government is increasing duty on the strongest alcohol and halving it on the weakest.  There are no more planned changes but all changes take effect at midnight on Sunday.

Tobacco
Tobacco duty increases at 2% above inflation.  Government is looking to change the regime to narrow lower cost tobacco brands and the main branded cigarettes and tobacco.  The increased duty will come into effect from 6pm today.

Vehicle Duty
Vehicle duty is increasing by inflation only and Government is freezing duty increases for Heavy Goods Vehicles.

The Approved Mileage Allowance is increasing from 40p to 45p per mile and the ability to use the allowance will be extended to volunteers travelling as passengers too.

Fuel Duty
The price of petrol has become a huge burden on families in last 6 months and the cost to fill a family car has increased by £10 per week.  

The previous cabinet put in place a fuel duty escalator with 7 planned duty increases.  3 have already taken place adding 3p to petrol.  The next was due to come in next week and that would add another 5p to a litre of petrol.  

The OBR said rising oil prices cause other tax revenues to fall by similar amount so there is no movement with revenue from elsewhere and Government cannot undermine the public finances.  

Government is now introducing a fair fuel stabiliser.  From tomorrow the supplementary charge will increase from 20% to 32% on profits.  This will raise £2bn of revenue.  

Based on that, Government is going to delay the inflation rise planed next week to next year and then the one planned next year to the following summer.

As well as not increasing the duty this year, Government is also cutting fuel duty by 1p per litre to take effect from 6pm tonight.  

This budget was one to help business, families and also incentivise innovation and manufacturing in the UK."

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