The Chancellor’s Budget

The Chancellor has delivered his Budget to Parliament alongside the publication of the Office for Budget Responsibility’s updated forecasts for growth.

The Office for Budget Responsibility (OBR) has revised up its expectations for growth – to 2.7% in 2014 and 2.3% in 2015. A record number of people are in work and the OBR now expects employment to reach 31.4 million by 2018. A deficit that reached 11% of GDP in 2009-10 is now forecast to fall by half to 5.5% in the coming year and will be eradicated by 2018-19.

We have listed the key announcements below, and will continue to review the Budget document this afternoon.

Budget 2014 announces the Government will:

• support businesses across the UK to invest and expand by doubling the annual investment allowance to £500,000 until the end of 2015
  • 1.102 To continue to support business investment, the government is doubling the annual investment allowance (AIA) to £500,000 from April 2014 until the end of 2015. This will particularly benefit small and medium sized firms. The increased AIA will mean that up to 4.9 million firms – 99.8% of businesses – will receive 100% up-front relief on their qualifying investment in plant and machinery. Three-quarters of the companies that will benefit from this increased tax relief on investment are outside London and the South East, and it will particularly help the agriculture and manufacturing sectors.
  • on Supporting access to finance and competition in banking,
    • 1.121 To support more bank lending to SMEs and encourage a more diverse banking sector, the British Business Bank will issue a request for proposals to implement an innovative wholesale guarantees programme alongside the Budget.
    • on Simplifying the tax system,

• 1.123 The government’s aim is that the tax system is simple to understand and easy to comply with. Following Office of Tax Simplification (OTS) recommendations, the government will simplify NICs for the self-employed by collecting class 2 NICs through Self Assessment from April 2016, and will implement OTS recommendations to simplify the taxation of employee benefits and expenses, employee share schemes and partnerships. The OTS will report this summer on how the competitiveness of UK tax administration can be improved, to help meet the Prime Minister’s aim that the UK rank in the top 5 countries in the world in which to do business.
• ensure that UK businesses are able to take advantage of new global opportunities by offering the best export finance in Europe – doubling the UK’s direct lending programme to £3 billion and cutting interest rates – and reducing the cost of long-distance flights for exporters and visitors to the UK by abolishing two tax bands
  • 1.124 This government is taking further action to support dynamic UK businesses, providing the finance and support they need to take advantage of fast-growing emerging economies and expand in the global recovery. Budget 2014 announces measures to build on the government’s world-class help for exporters, and give UK businesses access to the best export finance in Europe in order to win international trade contracts. The government will:
    • overhaul UK Export Finance’s (UKEF) direct lending programme, doubling it to£3 billion and cutting interest rates to the lowest permitted levels to provide competitive financing that helps UK firms win contracts and expand overseas
    • become much more proactive in support of UK business who want to expand globally, including supporting the UK-based supply chains of exporters and intangible exports for the first time by expanding the remit of UKEF and changing its underpinning legislation
    • step up marketing so that more businesses are aware of UKEF’s products and services
  • 1.126 The government already offers a world-class export support service through UK Trade and Investment (UKTI). To target and attract more of the world’s most talented entrepreneurs to establish businesses and create jobs in the UK, the government will double the funding and ambition of UKTI’s Global Entrepreneur Programme. The government will also strengthen its support for export promotion and inward investment in the financial services sector.
  • 1.127 International students contribute over £10 billion to the UK’s economy. To support the important role that higher education plays in economic development and to strengthen the UK’s strategic partnerships with emerging markets, the government will triple the number of Chevening Scholarships from 2015-16. The government will also expand the ‘Education is GREAT’ campaign to help attract more international students to the UK, and build on its reputation as a world-leading place to study.
  • 1.128 To help British businesses strengthen links with high growth markets, and to go further to make the UK an attractive option for business visitors and tourists, Budget 2014 announces that the government will reform air passenger duty (APD) by abolishing bands C and D from 1 April 2015. This will eliminate the two highest rates of APD charged on flights to
• on Education, science and innovation,
  • 1.129 Apprenticeships play a vital role in equipping young people with the skills they need to compete in the labour market, and that employers need to grow their businesses. The government is building on the success of the Apprenticeship Grants for Employers (AGE) scheme, by providing an extra £85 million in both 2014-15 and 2015-16 for over 100,000 grants to employers. The government will ensure that grants are targeted where they are most effective.
  • 1.130 The changing nature of the labour market is demanding higher skilled workers. There are however potential barriers in the postgraduate system that may be restricting the supply of these higher skills. To ensure the UK can compete successfully in the global economy, the government will investigate options to support increasing participation in postgraduate studies and will put forward its ideas at Autumn Statement 2014.
• on Local growth,
  • 1.148 Enterprise Zones are a key part of the government’s strategy for enabling growth in local areas. The government will continue to support Enterprise Zones to create even more new jobs and attract private investment to local areas. Availability of business rate discounts and Enhanced Capital Allowances will each be extended by 3 years as an incentive for new and expanding businesses to locate in Enterprise Zones.
• on Supporting access to finance and competition in banking,
  • 1.117 To ensure venture capital schemes continue to effectively support small and growing businesses, the government will make the Seed Enterprise Investment Scheme (SEIS) and the capital gains tax 50% reinvestment relief permanent. The government will also explore options for the tax reliefs to apply where individuals make investments in the form of convertible loans, and to better target high-risk investment will change the eligibility criteria of venture capital schemes to avoid subsidising low-risk activities that already benefit from certain government programmes.
• reduce business energy costs to ensure that the UK remains a competitive location for manufacturing, including by capping the Carbon Price Support rate at £18 from 2016-17 to 2019-20 and providing targeted support to energy intensive industries and Combined Heat and Power plants
  • 1.107 The government is announcing specific measures to tackle the energy costs faced by the most energy intensive industries to ensure they are as competitive as possible. Building on previous announcements to exempt EIIs from the support cost of Contracts for Difference, Budget 2014 announces that the government will:
    • extend the compensation for energy intensive industries for the cost of the CPF and EU emissions trading system to 2019-20
    • introduce a new compensation scheme, to help energy intensive industries with higher electricity costs resulting from the renewables obligation and small-scale feed in tariffs for renewable generation, from 2016-17

 

The Budget document is available here