The Chancellor provided an update on the nation’s finances along with new policy announcements. I have backed measures including a new sugar levy, a rise in the tax free personal allowance, a freeze in fuel duty, more investment in flood defences and lower and simpler taxes for small businesses.
I believe this was a sober and sensible Budget from the Government which showed a renewed emphasis on the need for fiscal discipline to steer the nation’s finances out of the red and into the black.
I welcome the sugar tax, something I and many colleagues had called for, but whilst this will inevitably grab the headlines there was plenty more to be welcomed.
I am particularly pleased that local businesses and families will see their tax bills reduced and I welcome the measures that the Chancellor announced to specifically help the Midlands region.
I appreciated the overall emphasis of the budgets as ‘a budget for the next generation’ and in many areas from health to schools to saving incentives, the chancellor put a key focus on the needs and aspirations of young people.
Public Finances
On the nation’s finances, it was announced that the deficit will now fall to 2.9 per cent of national income in 2016/17 – down from 10.2 per cent in 2009/10 – then down to 1.9 per cent in 2017/18, 1.0 per cent in 2018/19, and then a surplus of 0.5 per cent of GDP in 2019/20 or £10.4 billion – higher than forecast at the Autumn Statement. Debt is forecast to fall to 82.6 per cent of national income in 2016/17, falling further to 81.3 per cent in 2017/18, 79.9 per cent in 2018/19, 77.2 per cent in 2019/20 and 74.7 per cent in 2020/21.
In 2015 there were over half a million more businesses outside London and the South East compared to 2010, including nearly 160,000 more businesses in the North and over 95,000 more businesses in the Midlands.
Sugar Levy
The Government is going to put a new sugar levy on the soft drinks industry so they reduce the sugar content of their products to tackle childhood obesity. The money raised will be used to double sports funding in primary schools and fund longer school days in secondary schools that offer their pupils a wider range of activities, including extra sport.
In a speech on Childhood Obesity earlier this year, Nigel Huddleston MP called for the introduction of a tax on sugar saying,
“I have come round to the idea that when it is necessary to interfere, and when we have to balance out these freedoms with doing the right thing by our children, then we do need to consider all options. I have been slowly persuaded, but am now comfortably persuaded, on issues such as the sugar tax. The evidence is overwhelming. Of course, diet is very important, but so is physical activity, as has been mentioned many times. We must do more to encourage and enable exercise.
The levy will be charged on volumes according to total sugar content, with a main rate charge for drinks above 5 grams of sugar per 100 millilitres and a higher rate for drinks with more than 8 grams of sugar per 100 millilitres.
Tax Free Allowance
The Chancellor announced that from April 2017 the tax free personal allowance will rise to £11,500, a tax cut for 31 million people that means a typical basic rate taxpayer will be paying over £1,000 less income tax then when the Government came into power five years ago. The higher rate threshold will also increase to £45,000, a tax cut of over £400 to middle Britain.
In Mid Worcestershire, this will take an estimated 2,064 low-earners out of paying income tax altogether, as well as reducing income tax for 43,475 helping working people keep more of what they earn.
Duty Freezes
The Government has frozen fuel duty for the sixth year in a row, a saving of £75 a year to the average driver and £270 a year to a small business with a van. The Chancellor also announced the freezing of beer and cider duty to back British pubs.
Further investment in flood defences
Many communities experienced the devastating impacts of flooding this winter, with homes and businesses destroyed. On top of the government’s £2.3 billion capital programme, which will invest in over 1,500 flood defence schemes across the country, Budget 2016 announces an additional boost to spending on flood defence and resilience of over £700 million by 2020-21. The government will increase maintenance expenditure in England by £40 million per year, and deliver even more flood defence schemes. This increase in investment will be funded by a rise in the standard rate of Insurance Premium Tax by 0.5 percentage points.
Lower, Simpler Taxes For Small Businesses
To ensure we have a tax system that is competitive and fair, the Government are also modernising our tax rules to close loopholes that have allowed many large international companies to reduce their tax burdens to close to zero.
The Government will permanently double small business rate relief and increase the maximum threshold for relief from £12,000 to £15,000 meaning 600,000 small businesses will now never pay business rates again – a saving of up to almost £6,000.
They will also raise the threshold for the higher rate of business rates from £18,000 to £51,000, meaning 250,000 small businesses will get a tax cut on their business rates bill. In addition Corporation Tax will be cut further to 17 per cent from April 2020 to support job creation – benefitting over a million firms across the country.
In addition, the Chancellor announced that he will abolish Class 2 National Insurance altogether, creating a simpler tax system and providing an £130 tax cut for Britain’s 3 million strong army of the self-employed.
Support for the Midlands
This Budget pushes forward the government’s vision for the Midlands Engine for Growth. There are almost 96,000 more businesses in the Midlands than in 2010 – equal to 52 new business created every day. In 2015, median earnings of full-time employees grew faster in the West Midlands than in any other English region.
This Budget contains measures to support industry and growth in the Midlands, with a focus on supporting the development of Midlands Connect’s long-term transport strategy and the region’s traditional strengths in manufacturing and engineering.
The government has agreed with LEPs in the Midlands and the British Business Bank to create a Midlands Engine Investment Fund of over £250 million to invest in smaller businesses in the Midlands, subject to final funding arrangements.
To boost transport and connectivity in the Midlands, the government will:
· Put Midlands Connect on a statutory footing by the end of 2018 to create a sub-national transport body for the Midlands. This will support Midlands Connect in developing and implementing a long-term Midlands Transport Strategy following the £5 million of funding the government committed at Summer Budget 2015
· Develop Midlands Connect’s priority strategic roads schemes in this Parliament. The government will carry out development work on four major roads in the Midlands: upgrades to the M1 to provide a continuous smart motorway from London to Yorkshire, improvements to the A46 Newark bypass and its junction with the A1, upgrading the single carriageway link on the A45 Stanwick to Thrapston, and upgrading the M42 and M5 around Birmingham to a four lane smart motorway
· Launch the Local Majors Fund. This competitive fund will offer the opportunity for local areas to bid for funding for large local transport projects
· Allocate £11 million during 2016-2017 to fill around 214,000 potholes
You can read the full budget here https://www.gov.uk/government/publications/budget-2016-documents