Osborne unveils ‘bold’ budget for growth

GEORGE Osborne set out a “radical and bold” budget to drive economic growth, tackle low productivity and reform the welfare system.

Addressing a packed House of Commons, Mr Osborne revealed plans to cut corporation taxes to 18% by 2020 – the lowest in the G20 – while at the same time taking an axe to welfare spending to the tune of £12bn over the next three years.

The first Conservative budget for 18 years, described by Osborne as a “big budget with big ambitions to secure Britain’d future”, also saw the creation of a new compulsory National Living Wage, with a goal of £9 per hour by 2020.

Osborne said six million people on the minimum wage would benefit from the pay rise, which will begin at £7.20 per hour from April 2016 – up 11% from the current level of £6.50.

He said the cost to business of the new wage will be equivalent to 1% of corporate profits by 2020. The independent Office for Budget Responsibility says it will cost 60,000 jobs by 2021, but that overall employment is due to be higher by then by 1.1 million anyway.

He said: “This is the party for the working people first, putting security first.” and pledged “it’s a budget for lower tax, lower welfare” country.

He added: “Britain still spends too much, borrows too much, and our weak productivity shows we don’t train enough or build enough or invest enough.”

Among many announcements the MP for Tatton revealed further devolved powers for Greater Manchester –  and said progress was being made on similar devolution deals for Liverpool, Leeds and Sheffield.

Furthermore, there was £30m for Transport for the North to introduce an Oyster-card to make travel between cities and towns easier.

The system of Vehicle Excise Duty will be radically overhauled too with a standard rate of £140 covering 95% of cars on the road. Revenue will be used for a new Roads Fund,  to pay for investment in the strategic road network.

Paul Hyland, tax partner at Liverpool accountancy firm DSG said: “Generally there are some sensible measures, particularly around investment allowances and I welcome the new National Living Wage too – perhaps it will help rebalance our economy away from services and towards more skilled industries like manufacturing?

“On the downside, it was very disappointing to see so little new around regional infrastructure, particularly rail links in this region.

“I also think there is a sting in the tail for owner-managed businesses as it looks like the tax on dividends has been increased from 20% to 32%.”

Mr Osborne unveiled a growth forecast for the UK this year, of 2.4%, and pushed back the date at which the UK’s public finances would move into surplus to 2019/20.

The Office for Budget Responsibility said the government would spend £83bn more over the next five years than Mr Osborne said in his March Budget.

John Cridland, CBI Director-General, said: “This is a double edged budget for business. Firms will welcome measures to balance the books and boost investment, but they will be concerned by legislating for wage increases they may not be able to deliver.”