Budget 2016: What we know so far and what's to comeComments Off on Budget 2016: What we know so far and what's to come
On Wednesday George Osborne will once again take his red briefcase to the Houses of Parliament to deliver a budget.
This is expected to be a tricky one for the Chancellor, whose pledge to run an absolute budget surplus by 2019/20 has left him with little wiggle room.
As usual we have already been given a taster of what he will announce from the despatch box, while forecasters are filling the remaining hours before his speech firing out predictions about what else will be put on the table.
Here’s a round-up of what we know so far and what is expected to come.
What we know…
Low-paid workers will be incentivised to save through a bonus awarded on the money they are able to set aside.
Employees on in-work benefits like tax credits who manage to save £50 a month will get a 50% top-up on their savings after two years – a payout that could be worth up to £600.
‘Help to Save’ will be available to around 3.5 million adults. They would be able to withdraw the cash and would not face restrictions on how they use the funds.
The Chancellor has already warned of spending cuts worth 50p in every £100. The estimated total value of cuts has been put at £4 billion.
He said it was a choice between acting now and paying later and that the savings were “not a huge amount in the scheme of things”.
It is part of Osborne’s attempts to stay within the boundaries of his deficit reduction plan amid weaker economic growth.
Osborne called off a cut to tax relief on pension contributions for higher and top-rate earners after pressure from industry and backbench MPs.
What could be on its way…
Pensions may not be entirely left alone in this budget. Despite the earlier u-turn some are still expecting pensions to be targeted in some way, perhaps with a cap on contributions for high earners or a reduction in the lifetime allowance.
Experts have also predicted Osborne will raise revenues by increasing tax on insurance premiums. That would affect anyone who has a policy on anything from a car to a home.
A levy worth another 16p on cigarettes has also been suggested.
Despite being a potentially unpopular move, fuel duty could also rise, says the Standard’s Russell Lynch, as it would bring in billions Osborne needs to help meet his targets. A 2p increase would bring in £2.7 billion over the next three years.
Tax avoidance crackdown
The Times is expecting Osborne to unveil a ‘Paxman’ tax, in other words the closure of a loophole that has allowed TV presenters and public-sector bosses to avoid tax by being paid through personal service companies.
It takes its name from University Challenge frontman Jeremy Paxman who was paid in that way.
Osborne could try soften the blow of tax hikes and spending cuts through an increase to personal allowance and a higher-rate tax band threshold.
Lloyds share sale
With Lloyds shares moving back towards the price at which the Treasury can sell its remaining stake and make a profit, Osborne may fire the starting gun on a sale of its holding to the public.
Standard columnist Nick Goodway has forecast the fourth consecutive a 1p cut in the price of print.
Goodway says research has shown this is not just a populist move but also makes economic sense.
“The latest example of this was the research for Camra by the Centre for Economics and Business Research showing that as many as 550 pubs would be at risk if duty went up in line with the escalator.”