Budget 2016: putting the next generation first
This is a Budget that puts the next generation first – a Budget to make Britain fit for the future. The British economy is stronger because we confronted our country’s problems and took the difficult decisions, but we now face the challenge of a dangerous cocktail of global risks. Britain is well prepared to handle this challenge, but only if we act now so we don’t pay later.
We have a choice. We can choose to add to the risk and uncertainty, or we can be a force for stability. We can choose, as others are, short term fixes and more stimulus, or we can lead the world with long term solutions to long term problems. In this Budget we choose the long term. Sound public finances to deliver security, lower taxes on business and enterprise to create jobs, reform to improve schools, investment to build homes and infrastructure, and help for working people with lower taxes and support for saving.
That is the path we followed over the past five years and it’s given us one of the strongest economies in the world. It is the path we will follow in the years ahead. In this Budget we redouble our efforts to make Britain fit for the future.
Sound public finances to deliver security
Keeping public spending under control. We know that reducing spending reduces the deficit, providing families with lasting security. This Budget ensures we don’t spend more than we can afford. The Chief Secretary of the Treasury has been asked to undertake a further drive for efficiency and value for money, aiming to achieve a further £3.5 billion in savings by 2019/20 – that’s less than half of one per cent of government spending in that year.
Delivering stability in uncertain economic times. While we cannot be immune from the gathering storm clouds of the global economy, this Budget ensures we are prepared. That’s what our long term economic plan has been all about – building resilience. New analysis shows if we hadn’t taken the tough decisions we did in 2010 borrowing would be £930 billion more by 2020. Thanks to the action we’ve taken 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.
Ensuring taxes are paid. Our Conservative approach is clear: we’re going to have low taxes, but those taxes are going to be paid. We’re going to legislate against property developers shifting profits offshore so that UK tax is paid on UK property – raising over £500 million a year. We’ll raise a further £500 million by imposing a duty on public sector bodies to ensure the people they’re employing are paying the right tax and not pretending to work as contractors.
Helping working people save and making sure they keep more of the money they earn
Cutting taxes for working people so they can keep more of the money they earn. 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 we came into government five years ago. The higher rate threshold will also increase to £45,000, a tax cut of over £400 to middle Britain.
Freezing fuel duty to help household budgets and support small firms. We have 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. We’re also freezing beer and cider duty to back British pubs.
Introducing a new Lifetime ISA to help the next generation to save. We’re going to increase the ISA limit from just over £15,000 to £20,000 for everyone. For under 40s, many of whom haven’t had such a good deal from pensions, we’re going to introduce a completely new Lifetime ISA. You won’t have to choose between saving for your first home or saving for your retirement – the Government is going to give you money to do both. For every £4 saved, the Government will give you £1. So put in £4,000 a year and the Government will give you £1,000 every year until you’re 50. To ensure people get the best advice about saving, we’re increasing the tax free allowance that employers and employees can use to pay for advice to £500.
Reform to improve schools to deliver real opportunity
Improving our schools so our children get the best start in life. We’re providing money so every school in England becomes an academy by 2020 or is in the process of conversion. We’re going to shine a particular focus on performance in the north and look at the case for teaching some form of maths to 18 for all pupils. We are introducing a fair National Funding Formula and ensuring that 90 per cent of schools that will benefit from the new formula will see those benefits by the end of this Parliament.
A new sugar levy to encourage lower sugar levels in soft drinks – with the money raised used to support school sport. We are 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.
Tackling homelessness. We are investing £100 million to deliver low-cost ‘second stage’ accommodation for rough sleepers leaving hostels and domestic abuse victims and their families moving on from refuges. We’re also providing £10 million to prevent and reduce rough sleeping, doubling the funding for the Rough Sleeping Social Impact Bond from £5 million to £10 million and taking action to assist rough sleeping EU migrants to return to their home country.
Lower taxes on business and enterprise to create jobs
Cutting taxes for small businesses. We 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. We 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. We’re cutting Corporation Tax further to 17 per cent from April 2020 to support job creation – benefitting over a million firms across the country.
Cutting Capital Gains Tax to boost enterprise. From 6 April this year, we are cutting the basic rate of Capital Gains Tax to 10 per cent and the higher rate to 20 per cent so that we encourage investment in business. We are also introducing a brand new 10 per cent rate on long-term investment in unlisted companies up to £10 million.
Reforming Stamp Duty on commercial properties – a tax cut for small firms. We are moving from a slab to a slice tax system for commercial property. This will remove distortions in the property market and makes it easier for small firms that want to move to bigger premise. As a result, 90% of transactions will see their tax bill cut or stay the same.
Abolishing National Insurance Contributions for the self-employed. We 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.
Simplifying and modernising businesses taxes. To ensure we have a tax system that is competitive and fair, we 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. We will introduce a cap on interest deductions so that firms don’t over-borrow in the UK to fund activities in the rest of the world; we’ll change rules to stop companies using complex structures to avoid tax anywhere or who deduct the same expense twice; we’ll strengthen the withholding tax on royalty payments to stop firms shifting money to tax havens, and; we’ll modernise the way we treat losses, introducing new flexibilities and restricting past loss offsets for the 1 per cent of firms earnings over £5 million to 50 per cent.
Investment to build homes and infrastructure
Speeding up our planning system to get Britain building. In the recent Spending Review we doubled national investment in housing – housing that families can afford to buy, not just to rent. Today we are taking steps to speed up and streamline the planning system, zone brownfields development and remove restrictions on mobile phone masts. And we’re accepting all of the recommendations of the National Infrastructure Commission to keep Britain moving.
Giving the green light to Crossrail 2 – opening up land for 200,000 more homes in London. We’re providing £80 million to get Crossrail 2 going, bringing new homes to north east London and new capacity to crowded railways in the south west of our capital. We will have the necessary legislation ready before the end of the Parliament and constructions completed by the 2030s.
Improving transport links across the North. We are giving the green light to the High Speed 3 link between Manchester and Leeds, reducing journey times to around 30 minutes. We will find an extra £161 million to upgrade the M62 to a four lane smart motorway and develop the case for a new Trans Pennine tunnel to link Sheffield and Manchester. We will also press ahead with plans to upgrade the A66 and A69.
Giving local communities real incentives to grow the private sector and reap the rewards when they do
Making the devolved nations stronger. We’ve agreed to a new fiscal framework with Scotland, giving it one of the most powerful devolved Parliaments in the world. The spending decisions in this budget will see the Scottish Government budget rise by over £600 million, as we provide support for business rates, the oil and gas industry and negotiate a city deal with Edinburgh. The Supplementary Charge on oil and gas will halve from 20 per cent to 10 per cent, while the Petroleum Reserve Tax Charge will be effectively abolished. In response to the powerful case made by Ruth Davidson MSP, we’re providing new community facilities for local in people in Helensburgh and the Royal Navy personnel nearby at Faslane. We are devolving more powers to Wales, like income tax, and providing £350 million in additional funding in this budget. We will reduce tolls on the Severn River Crossings by 50 per cent once the Crossings are in public ownership, subject to public consultation, and we are opening the door to a ‘growth deal’ in north Wales, and opening discussions on a potential City Deal for Swansea Bay City Region. In Northern Ireland we are working towards devolving Corporation Tax, while the decisions in this Budget will increase the Executive’s budget by over £150 million.
Continuing the devolution revolution to return power to the regions. This budget makes bold advances in the devolution of power within England. We are transferring new powers over the criminal justice system and prisoner rehabilitation to Greater Manchester. There will be powerful new combined authorities with elected mayors in the East of England – covering Norfolk, Suffolk, Cambridgeshire and Peterborough – and the West of England. The Greater London Authority will move towards full business rate retention from next April, three years earlier than planned.