George Osborne has delivered his eighth Budget as chancellor, where he announced reforms including a further £3.5bn cuts with the backdrop of an economy in significantly worse shape than he predicted in his Autumn Statement.

State of economy

  • Growth forecasts revised down by nearly a fifth over next five years
  • GDP growth now predicted to be 2% for 2016, down from 2.4% in November’s Autumn Statement, and 2.2% and 2.1% in 2017 and 2018, down from 2.4% and 2.5% forecast four months ago
  • Inflation forecast to be 0.7% for 2016, rising to 1.6% next year

Public finances

  • £3.5bn in additional cuts to be made by 2020, with spending as a share of GDP set to fall to 36.9%
  • Forecast of debt as a share of GDP revised up in each of the next five years to 82.6% in 2016-17 and 81.3%, 79.9%, 77.2% and 74.7% in subsequent years – missing the chancellor’s own debt targets
  • Annual borrowing in 2015-6 forecast to be £1.3bn lower than forecast in November at £72.2bn
  • Borrowing forecasts revised up by more than 10% for each year until 2020 – up to £55.5bn (+£5.6bn) in 2016-7, £38.8bn (+£14bn) in 2017-8, and £21.4bn (+16.8bn) in 2018-9
  • Deficit as a share of GDP projected to fall to 2.9% in 2016-17, 1.9% in 2017-18 and 1% in 2018-19

Taxation

  • Threshold for top-rate income tax will rise from £42,385 now to £45,000 in April 2017
  • Tax-free personal allowance to rise from £11,000 in April 2016 to £11,500 in April 2017
  • Class 2 National Insurance contributions abolished from 2018
  • Capital Gains Tax to be cut from 28% to 20%, and from 18% to 10% for basic-rate taxpayers
  • Insurance premium to rise from 9.5% to 10%
  • Fuel duty to be frozen at 57.95p per litre
  • Beer, cider, and spirits duties to be frozen
  • Duties on wine and other alcohol to rise in line with inflation
  • Excise duties on tobacco to rise by 2% above inflation

Business

  • Corporation tax rate set to fall form 20% to 17% by 2020
  • Annual threshold for 100% business rates relief for small firms to rise from £6,000 to £12,000 and the higher rate from £18,000 to £51,000
  • Supplementary charge for oil and gas producers to be halved to 10%
  • Petroleum revenue tax to be “effectively abolished”
  • Amount of debt interest payments to be set against corporation tax capped at 30%
  • Crackdown on foreign firms selling products online in UK without paying VAT
  • Commercial stamp duty 0% rate on purchases up to £150,000, 2% on £150,000-£250,000 and 5% top rate above £250,000
  • New 2% stamp duty rate for high-value leases with net present value above £5m

Health

  • New sugar tax on soft drinks to be introduced in two years’ time, expected to raise £520m per year
  • Levy calculated on levels of sugar within soft drinks
  • Pure fruit juice and milk-based drinks excluded

Education

  • Plan for all schools in England to become academies by 2022
  • £520m from sugar tax to be spent on doubling funding for primary school sport in England
  • £285m in new funding available to secondary schools for extra after-school activities like sport and art
  • £500m to ensure “fair funding” formula for schools in England
  • Fines from Libor scandal to be spent on children’s hospital services, most notably in Manchester, Sheffield, Birmingham, and Southampton

Pensions and savings

  • Annual ISA limit to rise from £15,240 to £20,000
  • Under-40s offered new “lifetime ISA”, where government matches 25% of all money saved
  • Low-paid workers offered new state-backed savings scheme, worth up to £1,200 over four years
  • Independent financial advice service, The Money Advice Service, to be abolished

Infrastructure

  • Construction for new rails lines approved, including Crossrail 2 in London and the HS3 link between Manchester and Leeds
  • More than £230m earmarked for road improvements in the north of England
  • £700m earmarked for flood defences schemes, including projects in York, Leeds, Calder Valley, Carlisle, and Cumbria

Devolved powers

  • New elected mayors for cities and towns in southern England
  • Powers over criminal justice to be devolved to Greater Manchester and Greater London Assembly to retain business rates
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