“This is a Budget for the makers, the doers and the savers,” said chancellor George Osborne as he wrapped up the 2014 Budget speech.
And indeed he has come up with a package of measures that will see savings and pensions radically reformed, increased income tax thresholds, energy costs reduced and increased support for business, in particular the manufacturing sector.
Pensioners will have complete freedom to draw down as much or as little of their pension pot as they want to, when they want to
HMRC is to be given extra measures and funding to fight tax avoidance, along with a number of rate reliefs, an increase in the personal allowance to £10,500, and a doubling of the Annual Investment Allowance to £500,000 and its extension to 2015. He also introduced a scheme to boost exports - doubling the amount of finance available to £3bn.
However, Osborne stressed, all of it will be paid for on the back of the improving economy, further anti-avoidance measures and increased tax receipts.
The economy, he said, is continuing to recover, and faster than forecast. “We set out our plan, and together with the British people, we held our nerve,” he said. The job is far from done though, he added. The country was still borrowing too much. "We still don't invest enough, export enough or save enough so today we do more to put that right. This is a Budget for building a resilient economy. If you are a maker, a doer or a saver, this Budget is for you."
Because the economy is growing far more quickly than expected, the Office for Budget Responsibility (OBR) has had to revise its forecasts. The independent forecasting body is now predicting growth of 2.7% this year, followed by 2.3% next year and 2.6% in 2017. The chancellor said this was the biggest upward revision to growth between Budgets for at least 30 years.
The OBR also expects the economy later this year to be larger than it was before the recession. No major economy in the world is growing faster than the UK, Osborne said, but he warned that there was a need to be alert to the risks. And he pointed to the volatility in emerging economies and the impact that the troubles in Ukraine – such as higher energy costs – might have on growth.
As had been expected, Osborne announced a series of measures involving ISAs, including merging cash shares and ISAs into a single new ISA, with an annual tax-free savings limit of £15,000 from 1 July. The limit for Junior ISAs will be raised to £4,000.
Less expected was a wide reform of pensions policy, including a change in the way pensions are drawn down.
"Pensioners will have complete freedom to draw down as much or as little of their pension pot as they want to, when they want to - nobody will have to buy an annuity," he declared.
Osborne also announced a new Pensioner Bond paying market leading rates to be available from January to all people over 65, with interest rates of 2.8% for one-year bonds and 4% for three-year bonds.
The chancellor said that the number of registered tax avoidance schemes had fallen by half, and that the tax authority had been collecting twice as much tax through compliance. He also said he was going to give HMRC an increased budget and “modern powers” to collect taxes.
“Thanks to the prime minister’s leadership there are tough new global tax rules to stop the wealthiest individuals and companies shifting profits offshore,” he said. “Tax avoidance schemes have fallen by half.”
He also announced that stamp duty on homes worth more £500,000 would rise to 15% for those bought by companies, as part of tax avoidance measures.
A number of other VAT relief measures were announced, including those on air ambulances and for the creative industries.
He also scrapped the planned duty rise for whisky and other spirits and cut beer duty by a penny.
To support manufacturers, he is introducing a package of energy efficiency measures. These include capping carbon price support, extending the existing compensation scheme for energy intensive industries for four more years, introducing new compensation to protect energy intensive manufacturers from the rising costs of the Renewable Obligation and the Feed-in Tariffs, and exempting from the carbon price floor the electricity from Combined Heat and Power plants.
The chancellor announced he would raise the duty on fixed odds betting terminals to 25%, extend the horserace levy to bookmakers based offshore and cut bingo duty to 10%.
In a move also predicted to give a boost to business, the chancellor announced a reform of air passenger duty so all long-haul flights carry the same tax rate as currently charged for flights to USA.
At home, the biggest risk would be to abandon austerity measures, he said, saying that the proof that government policy was working was that the pace of net job creation is “three times faster than during any other recovery on record”.
He said that 1.3m jobs had already been created and predicted that earnings would grow faster than inflation this year and every other year in the forecast. “We now have a higher employment rate than the USA. That’s what we mean by getting Britain working.”
The deficit would be lower than expected this year, said Osborne, at 6.6%, adding that the government was on track to post a surplus of 0.2% in 2018/19, according to the OBR forecasts.
Government departments will face a £1bn reduction in 2014/15 and there will be a permanent cap on welfare. This will be capped at £119bn in 2015/16 rising to £127bn in 2018/19.