After much speculation Alistair Darling has delivered the final budget before the General Election and possibly the last one of his career as Chancellor.
The speech certainly struck a ‘wait and see’ tone and was highly political with only a few major announcements, those that were made contained little detail which will hopefully become clearer at a later date.
So what was said?
Borrowing and growth
The major news, which came as something of a surprise, was that government borrowing is less than predicted.
The Chancellor said the budget deficit would be £163bn rather than the £178bn previously expected, but cut growth forecasts. The forecast reduction is a result of a rise in corporate profitability in 2009, lower than expected unemployment and £500m more in revenue from the bankers bonus tax than had been predicted.
Mr Darling went on to say that he believed debt would continue to fall faster than previously forecast, dropping to £74bn in 2014-15, down £8bn on his earlier prediction.
However with regard to growth he went on to say that although he believed the economy would grow by 1 to 1.5% this year he has downgraded his prediction for 2011 to between 3% to 3.5% from his previously stated figure of 3.5%. Forecasts years after 2011 remain unchanged.
The main headline will be made by the announcement that Stamp Duty will be abolished for first time buyers buying properties up to £250,000. This will be paid for by an increase in Stamp Duty to 5% for house purchases above £1m.
No changes were announced to Income Tax, Corporation Tax or VAT, and in a surprising move Capital Gains Tax (CGT) has been left at 18%. CGT at this level has long been an anomaly with main rates of income tax at 20%, 40% and 50% from April 2010. Leaving CGT at 18% does allow tax planning opportunities for people to have income or investment returns to be set against CGT rather than Income Tax, which is set at a higher rate.
However there was a change to Inheritance Tax (IHT). The chancellor has frozen IHT at its current £325,000 threshold for four years, abandoning plans to raise the level to £350,000. A freezing of the threshold is in effect a tax rise as the values of estates increase.
Mr Darling also announced a number of measures to help curb tax evasion which he believes will raise £0.5bn per year.
Fuel, Alcohol and Tobacco duty
When it came to fuel, alcohol and tobacco duties it was announced that next month’s increase in fuel duties will be staged. It will rise by 1p in April, followed by a further 1p rise in October and the remainder in January.
Duty on beer, wine and spirits will increase as planned from midnight on Sunday, including 10% on cider, with further increases to come on high strength cider. Alcohol duties will also increase by 2% above inflation for two further years from 2013.
Tobacco duty will increase from today by 1% above inflation and then increase by 2% in real terms each year until 2014.
Help for small businesses
The Chancellor announced a series of measures designed to help business including a cut in business rates for one year from October meaning a tax reduction for over 500,000 firms in England.
In an effort to encourage entrepreneurship Mr Darling also announced that he was doubling the entrepreneur’s relief for capital gains tax.
At present, the first £1m of lifetime gains are taxed at a lower rate of 10%, rather than the main rate of 18%. That threshold will now be increased to £2m.
There was also a raft of other measures to help small businesses. Including news that over the next year, RBS and Lloyds between them would provide a total of £94bn of new business loans, nearly half to smaller firms, and the announcement of a new Growth Capital Fund which will provide growing firms with private capital and should ultimately provide £500m of finance. Commercial banks have so far agreed to contribute more than £100m.
With interest rates so low and inflation rising savers looked to the Chancellor for some relief.
It has previously been announced that the maximum an individual can pay into an ISA will be increased from April 2010 to £10,200. The Chancellor went further in this budget saying that this limit would now increase each year in line with inflation.
The budget contained no other measures specifically designed to help savers.
As expected there were measures to help the young unemployed Mr Darling extended a six month job or training guarantee for under 24-year-olds to March 2012, and announced a one-off £270m fund to create 20,000 extra university places.
As with any budget there are winners and losers, as more details is announced over the coming days we will be analysing the budget to see exactly what it means to you.