The rumour mills and gossip columns are in overdrive as the first budget of 2016 hones into view, as economic commentators jostle for the best sniper positions to pick off what George Osborne ‘might’ say on Wednesday the 16th March whilst addressing the House of Commons.
Having said that – and where normally much is left to the fevered imaginations of the watching, waiting galleries of the so-called experts – this year the Chancellor has been letting slip numerous juicy budget tidbits ahead of time, making many wonder if he’s got anything left up his sleeve to surprise us on his big day.
So, what do we know so far in terms of cats already having been let out of the Treasury’s bag? And what should we be fearing the most according to the rumours?
Help To Save
Well, we seemingly have it on good authority (that will be both the man brandishing the battered red briefcase on the steps of Number 11 tomorrow AND his boss, David Cameron) that the ‘Help to Save’ scheme is pretty much good to go; the concept of which is that should those people on low incomes somehow, miraculously afford to put something aside for a rainy day, the government will supplement every penny they save to the tune of a mooted 50% (up to a maximum of £300 per year). Which in principle sounds encouraging, yet when reading between the lines is a bit more suspect, on account of the government will only put their money where their mouths are once the original pot has been successfully stashed away for two years (admittedly at which juncture the saver is set to benefit by a not-to-be-sniffed-at sum of £600). And thereafter another two years need to pass before they warrant another timely top-up, providing the less well-off can manage to squirrel away what is, effectively, basic living costs.
HS3 rail link
Elsewhere we’ve been given to understand that the north of England (an otherwise long-forgotten stretch of land somewhere above the Watford Gap) will be handed a transport lifeline sometime in the foreseeable future (‘sometime’ being the operative word here), courtesy of the much-trumpeted HS3 rail upgrade – linking Manchester to Leeds and beyond – which is set to follow-on from the even more well-documented HS2 high speed link which is destined to connect London to Manchester more efficiently (and quicker) than ever before/post-Stephenson’s Rocket.
At the same time – and as Osborne extends his vision of a ‘Northern Powerhouse’ – there’s possibly going to be a new road tunnel which will pass beneath the Pennines and thus make road journeying between Manchester and Sheffield far less stressful.
Unfortunately because the British economy isn’t growing at quite the rate the Chancellor forecast it might at this point, belt-tightening will definitely continue, giving us all the perfect size 0 waist by the sounds of it.
Only recently Osborne spoke candidly about making a further £4 billion pounds’ worth of cuts on top of what’s been slashed previously, as the need to plug a massive £18 billion black hole in public finances which has appeared due to the underlying fact that initial growth calculations were a bit too optimistic; coupled with tax receipts falling short of expectations. The who, what, when and where of the matter is still open to wild and largely unfounded conjecture, however that won’t stop some arriving at the conclusion that the most vulnerable members of an already fragile society will bear the brunt of these impending cuts.
Cuts to Personal Independence Payments
One new piece of legislation which will certainly rankle with many is the news that Personal Independence Payments will suffer at the expense of Osborne’s axe swinging exercise this time of asking, a dead cert which the Disabilities Minister sheepishly admitted to recently.
Henceforth those disabled citizens wishing to claim the benefit will be required to construct a recognised quota of points before they are entitled to their share, with the points supposedly (and many will say, controversially) calculated on how many hurdles the individual claimant faces in life because of their disability. Not what you’d call a vote-winner to be honest. Slated to take effect from next year, the £1.2 billion cost-cutting measure aims to significantly reduce the points people receive for mobility problems first and foremost.
Corporate tax crackdown
Meanwhile, the Treasury does seem likely to don their best green tights and practice their Robin Hood impressions before launching its tax crackdown on the corporate big boys, like Google. Only not Google, because they’re already paying their fair share of tax apparently, so that’s OK. But there are plenty of big hitters who aren’t by all accounts, so with this in mind Osborne and his merry men (and women) of the Treasury will ask other multinationals to turn out their pockets, while at the same time targeting public sector employees who have been previously paid via personal service firms, by way of stealthily side-stepping tax demands. Everyone from Whitehall itself to the NHS, Channel 4 and the police will be firmly in the Treasury’s sights apparently.
Minimum wage increase
And finally in our bite-size round-up of things George Osborne has more than strongly hinted at will be found in the contents of his battle-worn satchel come budget day, it’s thought that confirmation of an increase in the national minimum wage will be announced; subsequently acknowledging the new rate to be set at £6.95 an hour from October 2016. What’s more, the higher tax threshold is likely to be raised too, a move which will doubtless bring a glow to the faces of those high-rollers if, as imagined, the 40p tax threshold kicks in at £50,000 before the hitherto-signposted 2020 introduction.
Increase in Insurance Premium Tax
It seems that the Treasury quite enjoyed raising the Insurance Premium Tax rate last time they attempted to balance the books/public purse strings, which netted them arguably the best revenue return out of all last November’s headline acts. So much so that much is being made of hushed whispers and grapevine-mutterings about the IPT rate going up once again, for a second successive budget. Which would result in hard-hit insurance policy providers not wasting too much time in passing on the (non-monetary) buck to motor, home, health and pet policyholders still reeling after last year’s setback. A set-back which saw the UK insurance sector stung by the IPT rate surging 3.5% in the one hit, from 6% to 9.5%, with talk now focusing on it being hiked up an additional 3%.
Fuel duty increase
Motorists could also receive the double whammy of the present freeze on fuel duty being sharply de-frosted. In fact, slammed in the microwave and have the heat cranked up to the max if some rumours doing the rounds prove true. Cryogenically sealed since 2011, mention of the continuation of the fuel duty status quo was conspicuous by its absence in last November’s Autumn Statement of intent; which in political terminology could mean it’s at risk of being thawed out this Spring, with a possible 2p rise being bandied around which would add an estimated £1 billion to the government’s coffers. There’s also the ‘get out of jail free card’ mentality which implies that with fuel prices at a half-decent low, public complaints will be kept to a minimum. But then, it won’t be long before all this changes, we’d hazard a guess.
Other subjects which might be broached to one end or another include new homes (the promise – hollow or otherwise – of more, again), an increase on duty on tobacco (yet neatly avoiding alcohol as Osborne aims to keep some voters on side in the lead up to this summer’s vote on the future of our continued presence as an EU member) and perhaps most contentious of all, salary sacrifices coming under fire.
Despite being a useful way in which many employers and employees avoid tax on parts of their incomes (with the more tax-efficient pensions and childcare vouchers annually providing more taxable wriggle-room for some 70% of companies), the Chancellor wants to curtail some of this and divert funds back to the Treasury’s kitty. Which, while irking employers, would be a damage limitation exercise from a more cynically-engineered electorate perspective.
It remains to be seen just what plays out on this occasion, and more pertinently, how the long-suffering public reacts to the legislative changes or at least proposals to that effect which will take shape over the months ahead. But one thing is for sure, we’ve all got a ringside seat to what could turn out to be an entertaining session in Parliament in the days directly after the Chancellor delivers his key budget goods.