With three months to go before the UK votes on its EU membership, the government is campaigning to remain in the EU, and George Osborne aimed not to antagonise either side with his 2016 Budget announcement that was made today (16/3). New UK unemployment figures show falls by 28,000 to 1.68 million between November and January. The rate of unemployment now remains at 5.1%.
Despite George Osborne confirming that the Government has failed to meet the goal of debt falling as a proportion of GDP this year, he still claims that the UK is still on course to clear its deficit by 2019/20.
George Osborne has set out £4 billion in extra spending cuts and announced investment in the UK’s infrastructure. In a budget that will “choose the long term” he has warned that issues are building pace again that need to be dealt with in the form of further cuts.
The government will raise fuel duty by inflation, or by inflation plus 1% when oil price are low (defined as below $75 per barrel). Brent crude is changing hands at a low $40 per barrel (as of 16/3), so a hike may be expected. There will be a 2% increase in tax on cigarettes, with 3% on rolling tobacco. £530 million raised by a tax on the makers of sugary drinks will be spent on boosting school sports.
Corporation tax will be cut to 17% in April 2020. Tax-free pay will rise to £11,500, and the 40% threshold will rise to £45,000.
An extra £700 million will be allocated for flood defences, to be paid with a 0.5% increase on the tax on insurance premiums. Plans also include £1.5 billion to turn all state schools in England into academies and extend school hours.
Reforms to business rates will mean 6,000 small businesses pay no rates and 250,000 have their rates cuts from April 2017, and new action to tackle overseas retailers who who store goods in Britain and sell them online without paying VAT will be put in place.
There is an aim to save £3.5 billion by 2020 through extra spending cuts.
Shadow chancellor John McDonnell said the Budget is “a press stunt to hide George Osborne’s failures”. In a tweet, the MP said “He [George Osbourne] has failed on every measure he has ever set himself.”
In his biggest Parliamentary test to date, Labour leader Jeremy Corbyn delivered the Opposition’s response. Mr. Corbyn claimed that the budget has “unfairness at its core” and the Conservative government’s lasting legacy will be the “mates rates” tax it offers to business connected to MPs.