UK Budget 2014: What Should We Expect?
- 17th March 2014
- Business & Economy
Consumer groups, businesses and unions have all published their wish lists for this year’s UK Budget. But who will be disappointed and what can we expect?
This Wednesday, the 19th of March, chancellor George Osborne will stand in the House of Commons with a battered red briefcase and set out the government’s spending priorities for the next year. Given that next year an electoral campaign will be underway, this Budget is effectively the last of the current parliament.
With the development of a new “garden city” at Ebbsfleet in Kent already announced, speculation is rife about what to expect this week. Virtually every large organisation in the UK has published its “Budget submission”, or its list of measures it would like to see in the finished statement. But who is likely to get their wish?
Inevitably, the answer will be nobody. Some groups will get small concessions but it’s comparatively rare for any group to get everything it contained in its submission. In reality, it is rarely expected. For example, the TUC is calling for the cancellation of further corporation tax cuts so the funds can be reinvested in raising capital allowances.
It claims that the gap between planned and actual investment in the UK is growing in spite of recent cuts to business taxes, and so a change of tack is needed. Since it is also calling for infrastructure projects scheduled in the next parliament to be brought forward, reversals of tax credit cuts and the removal of the coalition’s flagship Universal Credit welfare scheme, it seems unlikely that all these wishes will be fulfilled.
At the other end of the political spectrum, right-wing think tank the Institute for Economic Affairs (IEA) has argued for the abolition of free bus travel, TV licenses and winter fuel allowance for pensioners to save up to £4 billion per year. Instead means-tested pensioner benefits would rise by one per cent annually for the next three years.
Manufacturers have also waded in with calls for more support in order to fight energy prices and reduce business operating costs, after a survey by trade association EEF found spiralling input costs were perceived as the biggest threat to growth. A freeze and eventual cut to the Carbon Price Floor has also been suggested as had more funding for support services like the Technology Strategy Board.
Operating costs and energy prices are among the top priorities of big business. The Confederation of British Industry (CBI) has urged Mr Osborne to look at a freeze to the Carbon Price Floor, as well as exempting combined heat and power from it. It is also proposing a capital allowance for structures and buildings and tax cuts retail investment in a bid to boost the high street.
Everyone is in for some level of disappointment, but there are several decisions we can reasonably expect. We know that from April the income tax threshold is due to rise to £10,000, but it is possible the starting point for National Insurance contributions could increase to match it. In fact, to fight youth unemployment the chancellor may bring forward his plans to get rid of employers’ NICs on staff under the age of 25 – though this has not been suggested in public.
Head of tax policy at KPMG in the UK Chris Morgan has also indicated greater capital allowances could be realistic. However, increases in the threshold for the top rate of tax could be a possibility. Of course, it’s also likely there will be more measures to combat tax avoidance and profit-shifting, which will bring in valuable funds for the Treasury and probably please many voters – at the risk of discouraging businesses. Whatever the chancellor comes up with on Wednesday, there will be plenty of tough decisions to make.
Professor Maurits Van Rooijen, Rector and CEO at LSBF, thinks the government should give special attention to small businesses.
“There are three key issues that we would like to be addressed by George Osborne’s budget. First, the reduction of red tape – although the situation here in the UK is admittedly much better than in many mainland-European countries, SMEs would benefit enormously from simplification. Second, a credit system that is sympathetic to the needs of SMEs rather than the banks. And finally, a political agenda better aligned to the national interest. For instance, the government should be less obsessed about the ‘immigration numbers’ or the European agenda, and instead promote interests within Europe and at a global level for our economic development,” said Prof Van Rooijen.
As the Chancellor readies to present the UK Budget 2014 this week, what are your expectations for it?
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