2nd May 2013
The 2013 Annual Budget Statement painted a somewhat bleak economic picture, alleviated by a few crowd-pleasing bright spots. Chancellor of the Exchequer George Osborne cut the predicted level of growth in the UK during 2013 from 1.2% to 0.6%. The UK’s borrowing is expected to increase to £114bn in 2013, then forecast to start falling in 2014. For its part, the Office for Budgetary Responsibility does not expect net debt to fall until 2017/18 – a year later than previously anticipated. Further cuts in government spending were also announced.
The UK is expected to avoid tipping back into recession this year, although the Chancellor warned that further turbulence in the eurozone could hamper economic recovery. He maintained that the coalition government’s economic policies were proving effective, although he admitted that “it is taking longer than anyone hoped.
A new Employment Allowance will cut companies’ National Insurance bills by £2,000 while 450,000 smaller companies will be exempt from paying employers’ National Insurance contributions. Corporation tax will be reduced by one percentage point to 20% during 2015, giving the UK “the lowest business tax of any major economy in the world.
The government pledged to guarantee £130bn-worth of new mortgage loans for three years, starting in 2014. The move aims to help prospective homebuyers who cannot find the money for the large deposits demanded by many mortgage lenders. Meanwhile, new ‘Help to Buy’ measures will enable homebuyers to receive interest-free loans over five years of up to 20% of the value of newly built homes worth up to £600,000.
The Chancellor announced a controversial tax relief of 20% on childcare costs of up to £6,000 per child from 2015. Meanwhile, the Personal Allowance – the amount an individual is allowed to earn before they start paying income tax – will rise to £10,000 in 2014, and the single-tier weekly pension payment of £144 per week will be introduced in 2016 – a year earlier than previously planned. Another measure will see Equitable Life policyholders who lost money on with-profits policies bought before 1992 receive payments of at least £5,000.
The Bank of England’s target for 2% inflation remained unchanged although the remit of its policymakers was widened to include a focus on economic growth. The move affords greater flexibility for the UK central bank’s policymakers, allowing them additional scope to make decisions that will keep inflation stable while supporting the broader economy.