This Budget was about sharing the proceeds of growth with businesses
Margareta Pagano is a former business editor of the Independent on Sunday who now writes columns and business interviews for a range of publications, including the Independent, Independent on Sunday and London Evening Standard.
Wednesday 19 March 2014
Outlook Bingo! Has George Osborne dealt himself a full house with his smartest Budget to date? Yes, I rather think he has, and the Coalition must be wishing the election was being held this May rather than next. With his cut to the bingo tax, the penny off a pint, big incentives for pensioners and savers, and the boost to manufacturing industry, the Chancellor's fifth Budget was a cleverly crafted package that should help working men and women as much as business. Unless you had a serious vice, there was something for everyone.
By far the most far-reaching of Mr Osborne's reforms were the £7bn package to help manufacturers cut their energy costs to accelerate the recovery and an imaginative, long overdue shake-up of the tax system regulating the savings market.
The boosts for business were across the board and designed to tip the balance back to a manufacturing-led recovery. The Chancellor even dared to cheer up his LibDem colleagues by saying he was setting out a "modern industrial strategy" without hissing from his Tory colleagues and without actually picking out any winners.
Read more: The Independent's Budget coverage in full
Instead, and more pertinently, the energy cuts were well-targeted to be of most help to UK manufacturers, which are based mainly in the Midlands and North – slashing thousands of pounds off their energy bills, possibly up to £50,000 a year for many companies and £15 off the household bill. As energy costs are by far the biggest bugbear for any business, this was music to the CBI's ears and should send Ed Miliband back to the drawing board for new ways to taunt the Chancellor. Who knows, the beer-drinking, bingo-playing Northern working man and woman, either in employment or looking for work, might even be tempted by Mr Osborne's land grab for their votes. Smart stuff.
One of the more elegant bits of the Budget was the emphasis on support for the regions; apart from helping fill potholes in Northampton, there was the £1bn Cambridge Cities Deal, an enterprise zone for Northern Ireland, new housing in Ebbsfleet, Barking and Brentwood, and a tax freeze for Scottish whisky-makers and West Country cider-makers.
As well as freezing the price of the carbon floor to hold down energy costs, there's the doubling of the annual 100 per cent tax allowance for capital investment to £500,000 that should help larger companies plan for new plant and machinery for the longer term.
All companies that export will benefit also from the decision to double the amount of Government credit to £3bn to back up their overseas sales, while the interest rate they are charged on that credit has been cut by a third. There's also more support for apprenticeships, with backing for another 100,000 places, but everyone – government, schools and parents – needs to work harder at publicising these schemes as there are too many anomalies.
As expected, the long-term target for corporation tax – down to 21 per cent this April and 20 per cent next year – didn't change, but there was finally more help cutting national insurance: a £2,000 exemption for all businesses and charities, as well as for employees under 21.
For entrepreneurs and start-ups, by far the best news is that the Seed Enterprise Investment Scheme (SEIS) has been made permanent. If Mr Osborne, who introduced the allowance, had been a bit bolder, though, he should have at least doubled the amount that individuals can invest –£100,000 at the moment – and how much start-up companies can raise through the scheme, which is currently £150,000. One for next year perhaps?
Winning over the silver-haired, saving public had to be at the heart of this Budget if the Coalition has any chance of winning next May; pensioners are most likely to vote. As the Chancellor can't afford to raise interest rates yet, he did something even better. The ISA limit is raised to £15,000 per saver, and £10bn of new fixed-rate bonds at higher interest rates will be made available for those over 65.
But the bombshell was abolishing the requirement to invest in low-yielding annuities for those saving for retirement. And what a bombshell: within an hour of the Budget, the shares of some of the UK's leading annuity providers, such as Just Retirement Group, had crashed by up to 30 per cent, while shares in the big providers such as Legal and General fell by 11 per cent. It's a short-term hiccup, as everyone in the industry knew annuities were for the chop; now they have to come up with new, and hopefully better, savings products.
From April next year, anyone aged 55-plus will be able to take their entire pension fund in cash – although only the first 25 per cent will be tax-free and the balance taxed at the saver's marginal rate. Finally, pensioners will have the "freedom to draw down as much or as little of their pension pots as they want – any time they want". About time too; next year Mr Osborne should go for broke and scrap all tax on pensions.
With the news that employment is at a record high, with 30.2 million people in work and 473,000 new private-sector jobs created last year, and unemployment below 7 per cent, you could say we are already in a mini-boom One economist, Ros Altmann has been a lone voice in forecasting for months that business investment has been shooting up unnoticed and that growth will be higher than either the Chancellor or the OBR are predicting. She looks more correct by the day.
It's been said there are at least three sides to Mr Osborne's political personae: the Thatcher ideologue, the career politician without scruple and the moderniser. There's a fourth: helped by a little transatlantic QE, he's turning out to be Mr Lucky.
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