What to expect from today’s Budget

From public finances to petrol prices – a brief breakdown of what George Osborne is likely to pull out of his red box The economy The chancellor will announce the latest forecasts from the independent Office for Budget Responsibility, which are expected to downgrade projections for GDP; 2.1% growth was expected this year and 2.6% in 2012, but the City consensus is currently 1.8% for 2010 and 2.1% for next year. Petrol prices An above-inflation increase in petrol duty planned for April, which would have added 5p per litre, is expected to be cancelled. A “fuel stabiliser” may help to shield motorists against the impact of soaring oil prices caused by unrest in the Middle East. Public finances Osborne will offer his predictions for the size of his budget deficit over the next few years. Until yesterday, experts were expecting him to have up to £10bn to spare, but after grim news on February’s tax receipts, it looks as though the deficit will hit £141bn, instead of the £148bn he was expecting in November. That gives him little room for giveaways, especially as slower growth over the next two years is likely to make the deficit larger in future years. Tax reform The Office of Tax Simplification, commissioned by Osborne, has recommended abolishing the divide between income tax and national insurance. The chancellor is likely to say he’s considering this radical shakeup. Growth review Ministers have been hauled before Osborne, Vince Cable and Oliver Letwin to explain how their departments can boost growth – without spending money. The Treasury will publish a “growth review” alongside the budget, detailing the results: pro-enterprise measures on skills, planning and infrastructure to “rebalance” the economy away from unsustainable, debt-fuelled growth, towards a more sustainable model. Green investment bank The £1bn a year bank, which will channel cash to promising environmental firms that are unable to raise cash on the markets, was meant to be a flagship of the government’s environmental policies, but it is understood the Treasury has banned it from borrowing until 2015 at the earliest, which could limit its power to unleash a green revolution. Planning Councils will be told to presume housing development is needed, instead of making developers argue the case. Critics are warning this could lead to concreting-over of the green belt. Local authorities are also expected to be given the power to hold on to some of the business rates they raise, giving them an incentive to approve commercial developments. Housing The Treasury and housebuilders will be jointly funding a scheme to help hard-up homebuyers get a foothold in the market, by offering them shared equity in newbuild homes. Income tax threshold The coalition agreement included a promise to make progress each year towards the Liberal Democrats’ promise to lift everyone earning less than £10,000 out of paying tax, by raising the personal allowance. Expect a fresh increase. That means a handout for all basic rate taxpayers, but the Treasury is likely to repeat its strategy in last year’s budget of pulling down the higher rate tax threshold, to ensure that bigger earners do not benefit. Youth unemployment A £300m package to get young people into work or training, including the creation of 50,000 apprenticeships. Tax avoidance Reports suggest Osborne is banking on new tax avoidance measures to bring in £1bn a year. He may also tighten the rules on non-doms, who can avoid tax on their overseas earnings. Environmental measures Osborne agrees with the Organisation for Economic Co-operation and Development that the government’s green taxes and incentives are too complex. With Europe’s emissions trading scheme, the climate change levy and renewables targets, it is hard for firms to calculate how much going green is going to cost. Expect streamlining. Booze If the government applies the duty escalator, raising the price of alcohol faster than inflation each year, it could add up to 7p to the cost of a pint of beer from April. Surprises? Every chancellor likes to pull a rabbit or two out of his budget red box, and we can rely on Osborne to hold back a few surprises to lighten the mood of austerity Britain. In 2005, Gordon Brown used his statement to announce funding for a statue of the Queen Mum. Could the chancellor be about to join in royal wedding mania? Budget 2011 Budget Economic policy Economics Tax and spending Petrol prices Motoring Public finance Tax Economic growth (GDP) Banking Housing Communities Unemployment Tax avoidance Corporate governance Alcohol guardian.co.uk

Posted by on March 23, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.