MR Osborne delivered his most recent budget speech this time last week. As many of the redtop headlines suggested, the details were as unpopular as ever, writes Michael Rankin.
This may be due to the fall in predicted growth for the country, which was reduced down to 0.6% from 1.2% for 2013. However, the chancellor was confident that the UK would avoid a ’triple dip’ recession.
Although progress is being made on the budget deficit, the UK's national debt will rise to 85% of Gross Domestic Product, and is not expected to start coming down until 2017/18, two years later than predicted when the coalition came to power.
So where is the government spending the money. Well, it is estimated that £51 billion is spent each year on paying the interest on the Government’s outstanding debt. This would have been a lot worse if interest rates were not at 0.5%. Imagine the cost if we had the pay the same amount on debt as say Spain or Italy.
Although the cost of servicing the high level of debt could be larger, it is still more than is to be spent on defence and a third of what is spent on health.
The problem, known as the fiscal deficit, is the gap between how much is taken from tax receipts and the amount spent each year. That figure is currently quoted as £108 billion per year, which is still likely to take another 5 years to clear.
Although the press often suggests how the coalition takes from the poor to give to the rich, I’m not sure the people with wealth in this county would agree.
It is estimated that in 2012/13, the top 1% of income taxpayers received 10% of the total income but paid 27% of the tax. I don’t think you need to be a genius to workout that regardless of your beliefs, the wealthy are certainly paying their way.
At the bottom end of income earners, the increase in the income tax personal allowance should help 2.7 million people fall out of the income tax system by 2014/15.
The other big news for the budget was the continuing fall in corporation tax. With this tax rate due to fall to 20%, this will give the UK the most competitive corporation tax rate in the G7 and the G20. It is hoped this will encourage new business to the UK, in a similar ways to Margaret Thatcher’s tax breaks in the 80’s
The other announcement designed to stimulate growth was that the government would provide ’Help to Buy’ mortgage support, worth up to 20% of the value of a new build home. This will be interest free for 5 years and repayable when the house is sold.
This will be made available to everyone, up to a maximum house value of £600,000. This seems to have split opinion on whether this is a good thing for stimulating the housing market or whether it may duplicate the problems seen in the US with sub-prime mortgages, to those people who can ultimate not afford to cover a mortgage.
I’m sure that if you are currently trying to get a foot on the property ladder, this will be a very welcome offer. It was certainly positive for quoted house builders, the majority of which immediately rose 5% on the back of the news.
Michael Rankin is a Chartered Fellow of the Chartered Institute for Securities & Investment and a Divisional Director in the Teesside office of Brewin Dolphin, and can be contacted on 01642 608855.

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