The Chancellor has spoken, the opposition leader has blasted the speech, and now the nit-picking begins. But what were the five biggest announcements in today’s Budget? Here’s a guide:
1. The pensions revolution
His plan to abolish the 55 per cent tax rate on those who withdraw more than they should from their pension all seems very generous. (Except it isn’t – the Budget small print reckons it’ll lead to a spending splurge that will send £2bn to the Exchequer). The policy is aimed to address a genuine disappointment that many people experience on retirement when they discover what they can and can’t do with their pension pot. Tax restrictions on how pensioners access pension pots will be lifted and pensioners will not have to buy an annuity. The amount that can be taken out as a lump sum will increase from £18,000 to £30,000. Defined contributions pensions will be made more flexible. As Fraser says, this means that millions of people will see their pension pot turn into a bank account – and those people are the ones most likely to vote.
2. Savings – ISA limit to £15k.
This is another prong of Osborne’s offer for the aspirational voters. ISAs will become much more generous, with the allowance rising to £15,000 a year, and stocks and shares ISAs will merge with cash ISAs – savers will be able to put the full amount in cash or shares. (Although where you find a Cash ISA that doesn’t offer negative real rate of interest is a separate question). The 10 per cent rate on income from savings will be abolished, which allowed Osborne to tease Labour about its own 10p disaster when in government. A churlish observer would point out that no matter how big the pot gets, there’s still less of an incentive to save than there is to borrow with low interest rates.
3. Personal tax allowance
This will rise to £10,500, but there was no budge on the 40p rate. Osborne simply pointed out that raising the allowance would benefit all taxpayers. The government says this will make the average taxpayer £800 a year better-off. But the sum will be less than half of this for those on welfare, due to the withdrawal of various benefits.
4. Welfare cap set at set at £119bn
The cap will then rise to £127bn in 2018-9. Osborne will want Labour to kick up a fuss about this: it’s his trap.
5. It’s a budget for Sun readers
Bingo duty halved to 10%, 1p off a pint of beer, cider duty and Scottish whisky duty frozen, the planned rise in petrol duty scrapped. Anyone would think the Chancellor was trying to make amends to Sun readers for the 2012 budget in which their pasties and caravans took a hit. This was, as the Treasury briefed, a very blue-collar budget.