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2010 Budget

There were no huge surprises in today’s budget with most major announcements having been leaked previously or mooted in December's Pre-Budget.

As a pre-election budget it was unsurprisingly political and did not provide many concrete details of spending cuts to be made in the future, a situation that will not inspire great international confidence in Britain’s ability to address its deficit. Yet the chancellor did signal that debt will be £100bn lower by 2013/14 than he predicted at last year's Budget.

One of the main issues covered in the news yesterday was Mr Darling’s plan for a universal service obligation on financial institutions such as banks and building societies to ensure everyone can have a bank account. This, he said, will allow up to 1m people to open accounts in the next five years. The decision would need legislation to be changed after the general election expected on May 6.

David Cameron, the Conservative leader, previously signaled that a Tory government could adopt the proposal. “Let’s look at the detail,” he said. “Clearly there is a problem with people left out of the financial system.”

So what are the changes taking place that will impact directly on our wallets?

Well, if you’re a cider drinker stop reading now - from Sunday duty on cider will be increased by 10% above inflation. And definitions will change, so strong ciders are taxed more heavily. Tobacco taxes will also rise by 1% above inflation, then 2% in subsequent years. Next month’s planned 3p increase in fuel duty will be staged to soften the blow. It will go up by 1p in April, another 1p in October and a final 1p in January 2011.

However, there will be no further changes to VAT, National Insurance, or income tax unless you earn more than £150,000, in which case the 50% rate of income tax will come in next month. Those earning more than £100,000 will pay more because some allowances will be removed. Mr Darling also plans to stop people living in the most expensive houses being eligible for housing benefit.

For workers over 60 and those approaching retirement the chancellor said he will cut the number of hours they need to work to qualify for working tax credits. He also said that the government is looking into scrapping the compulsory retirement age. Darling announced that the government will pay the winter fuel payments for another year, while from April next year pensioners will not pay tax on the first £10,000 of their income.

Mr Darling also signalled his intent to continue supporting youth who are not in employment, education or training by extending the guarantee of employment or training for 18-24 year olds out of work for more than six months.

For families, those with one and two-year-olds will get an extra £4 a week in child tax credits, regardless of whether the recipients are single parents, cohabiting or married.

Another big thing expected and confirmed was that first-time home buyers will pay no stamp duty on properties worth up to £250,000 - this will apply to 9 out of 10 buyers according to the chancellor. It will apply this year and next. The cut for first-time buyers will be paid for by a hike in stamp duty to 5% for properties worth more than a million pounds.

In the face of high unemployment and increasing difficulty in accessing low-cost credit we are all learning the importance of having some savings put away to help cope with unexpected shocks. The (old) news that the limit for Individual Savings Accounts (ISAs) will be increased to £10,200 is therefore welcomed. In addition the limit will increase annually in line with inflation.

The chancellor also committed the government to helping businesses grow. Access to finance is key argued the chancellor so over the next year he has agreed with the Royal Bank of Scotland and Lloyds - both state-subsidised - that they will lend some £94bn - at least half to small and medium-sized firms.

In addition Mr Darling said he is creating a new investment corporation - called UK Finance For Growth - to oversee the government's £4bn range of support for businesses and help them negotiate the bureaucracy involved. Business rates are to be cut for a year from October, meaning a tax reduction for 500,000 small firms in England.

Finally, the biggest cheer of the day was reserved for Mr. Darling’s announcement that Britain will sign agreements to combat tax avoidance with three new countries: Dominica, Grenada and Belize (where the Conservative deputy chairman Lord Ashcroft used to be based).

 

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