This week saw Chancellor George Osborne deliver his second Budget of the year. Basking in the afterglow of the Conservative’s triumph at the ballot box he sought an opportunity to make political capital out of the first wholly conservative budget since 1997. There were strong conservative themes at the heart of the package. A promise of further cuts in corporation tax and toughening up the welfare system are measures straight out of the party’s traditional playbook. Narrowing the scope of Inheritance Tax is also a policy that has long been a Conservative aspiration, one with which Osborne was associated as far back as the election that never was, in 2007.
But there were other moves too in which Osborne, a politician to his fingertips sought to pitch his tent in the centre ground or even a little to the left of that.
The headline grabbing move to uprate the National Minimum Wage for most workers to a National Living wage plays against stereotypes and along the lines of the blue collar conservatism that the party is keen to push. In practice the increase to a headline grabbing £9.00 per hour will take five years, probably not that much faster a rate than the National Minimum Wage was projected to rise anyway.
There were plans too to introduce a levy to fund training, shades of the old EITB for those whose memories stretch back to the 1980’s. There are as yet very few details on this and the MTA will be seeking to input into the consultation process. An anonymous Cabinet Minister has been quoted as saying that the measure is, to paraphrase slightly, a way of applying boot to backside of ‘lazy’ companies who don’t train. The risks must be that companies are not fully compensated for the training they do undertake or that the funding collects in a quango somewhere inaccessible to SMEs.
The MTA gave a cautious welcome to the news that the AIA is to be set at £200,000 on a permanent basis. It’s good news, albeit already heavily signalled, that the rate will not now fall to £25,000 at the end of the year as it had been scheduled to do. However this move is not in itself enough to fix the system and the MTA will continue to press for a set of capital allowances that are truly internationally competitive. Business will of course also give a warm welcome to the signalled cut in Corporation Tax, now scheduled to fall to 18%, the lowest level in the G7 and a really attractive rate for Foreign Direct Investment.
Although most personal tax rates were only set in March at the time of the last budget, there were changes to Vehicle Excise Duty, pension reliefs and Non-Dom status.
It was a surprisingly extensive package with a Productivity Plan, being published as the Friday Brief goes live, to come. As so often the devil may be in the detail and the implementation: we’ll continue to look out for the traps and keep manufacturing’s interests high in the lists of priorities.