Budget 2013: the small print




Budget 2013: What it means for you

We've taken a look through the Budget red book to see what George Osborne is planning that he didn't announce in his speech.

"The devil is in the detail", or so the old adage goes. And that's never more true than at Budget time. Chancellor George Osborne may have spoken to Parliament for the best part of an hour, but there are usually plenty of things he didn't mention tucked away in the Budget book.%VIRTUAL-SkimlinksPromo%
We've pored through it to see what other measures are on the horizon.

The Bank of England can let inflation go... temporarily
There was talk in the speech about the Bank of England's "new remit", but what the red book says is that the Bank of England's Monetary Policy Committee may "therefore wish to allow inflation to deviate from the target temporarily".

Consultation on allowing Child Trust Funds to move to Junior ISAs
The Labour Government's flagship Child Trust Fund (CTF) scheme was one of the first things scrapped by the Coalition. It introduced Junior ISAs instead. As a result, the parents of those children who had money invested in cash or stocks and shares CTF accounts have, in many cases, seen their returns fall as providers have pulled the shutters down. Meanwhile, more competitive Junior ISAs have been launched. Following a series of campaigns, the Government will now consult on allowing CTFs to be switched into Junior ISAs.

Right To Buy period
The qualifying period for council tenants who want to buy their own homes will be reduced from five years to three. The Government is pledging to replace council homes that are sold on a one-to-one basis. The Right To Buy process will also be simplified.

Social housing
Landlords of tenants in social housing who earn over £60,000 a year will be allowed to charge them market rent. Tenants will also be required to declare their income.

Broadband spending cut?
There will be a "reprofiling of funding for broadband programmes", which in plain English sounds like a cut to this plan.

Employee share scheme
The Chancellor did briefly mention in his speech that this scheme would become "more generous". The detail is that employees will not pay Income Tax and National Insurance on the first £2,000 of any shares they receive. And this scheme is due to launch in September 2013.

More Bank of Daves?
Dave Fishwick, owner of Burnley Savings and Loans and featured in the Channel 4 documentary Bank of Dave, has famously struggled to get a banking licence. The Budget book says that the "authorisation process for becoming a bank will be quicker and easier and there will be a comprehensive series of changes to the capital and liquidity rules to level the playing field for new banks". Whether that will lead to a rash of new 'challenger' banks remains to be seen.

Residential property in private pensions
The Government is to "explore" whether the conversion of unused commercial property in urban areas into homes could be helped by allowing people to add them to their Self Invested Personal Pensions (SIPPs) and Small Self Administered Schemes (SSASs). Pensions experts have already warned that this could leave people's retirement incomes far too exposed to property, given many people already see their current home as part of their pension.

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Budget 2013: the small print

The Chancellor has cut the price of beer. He said a planned 3p rise in beer duty tax was being scrapped and replaced by a 1p cut on a pint of beer.

While lower interest rates are intended to boost borrowing for business and keep costs down for mortgage customers, the Chancellor brings another Budget devoid of encouragement for savers. Faced with near 0% interest rates and 3% inflation, there is no help for those who need to save for the future, or those that already live on their savings in retirement.

"Low interest rates are making life ever harder for people reliant on their savings. Their spending power is being reduced and their standard of living eroded on a daily basis," said Simon Rose of Save Our Savers. "The attack on savers is short-sighted and undermines the country's prospects for investment, growth and retirement."

A major headline-grabbing measure to help struggling first-time buyers is the new Help-to-Buy scheme. Made up of two parts, the first commits £1.3bn to shared equity loans that enable first-time buyers to borrow up to 20% of the value of a new build home towards a deposit, providing they can contribute 5% themselves. The loans will be interest free for five years and be repayable on house sale. The scheme will cover all new properties up to £600,000 in value – around 90% of all new homes in the UK.

The second is a Mortgage Guarantee for lenders, intended to help all families who are struggling with deposits. The scheme will make £130bn worth of mortgages available from 2014 and enable lenders to offer loans at higher-to-loan value, which will Mr Osborne said will "dramatically increase" the availability of mortgages. The guarantee will run for three years and apply to bold old and new property. Stephen Noakes, Mortgage Director at Lloyds Banking Group, commented: "We are very supportive of innovation in the housing market and believe that the mortgage guarantee scheme, will give a much needed boost to the housing market and most importantly address the issue of accessibility. "Crucially, this scheme will not only help first time buyers but also second steppers, a key segment of the housing market that is also in need of more support and attention. Whilst the property market is likely to continue to be challenging, the fresh support announced today will have a real knock on effect across the whole of the housing market and we expect it could help around 50,000 people a year."

Payment of taxes is the "glue that holds the economy together" the Chancellor said as he reaffirmed his commitment to crackdown on evasion and the professional services that advise on it. "With more measures to rein in Corporate Tax avoiders, the Chancellor has sent a clear message that aggressive avoidance is no longer acceptable," said Martin Hook, Managing Director of research and development tax specialists, Alma Consulting Group. "This will have a significant impact on the Big 4 and other firms who market tax avoidance schemes and will need to consider the morality of the schemes that they sell and the spirit of the tax legislation."

As was widely predicted, Osborne froze the fuel duty hike due in September 2013. He announced that his repeated scrapping of this duty has saved the average Ford Focus owner £7 on every tank of petrol.

Stating his commitment to helping entrepreneurs get ahead and recognising that the cost of employing people is a huge burden to small firms, the Chancellor announced a surprise move with National Insurance relief of £2,000. Called the Employment Allowance, he said the new measure means than 450,000 small businesses – which account for one third of all companies in the UK - can employ one person earning £22,000 or four people earning the minimum wage, without paying National Insurance.

"The Employment Allowance will certainly be a massive boon for small businesses. Not least because most weren't really expecting it," said Jonathan Elliott, managing director of MakeItCheaper.com. "Put it another way, a £2,000 saving for a typical small business is the equivalent of cutting their annual energy bill in half or putting 1,250 litres of free fuel in its fleet of vehicles." Yet the Government fell short on support for new enterprises, explains John Williams from Kuber: "Noticeably absent from the Chancellor's speech was any news of extending or enhancing the Enterprise Investment Scheme (EIS). Many were hoping to see the Government offer more help to start-up companies looking for second round finances, but nothing materialised."

There was bad news for public sector workers, who will see pay increases limited to 1% in 2015/2016. The government will also revisit 'progressive pay' which sees pay increase automatically each year which he said was 'difficult to justify' given that private sector pay has been frozen or cut. The armed forces, however, will be exempt from this.

Feeling the pressure on help working families, the Chancellor made a welcome announcement that working parents will receive a contribution from the Government towards the cost of childcare. Working parents will receive 20% - equivalent to the basic rate of tax - of their yearly childcare costs, up to a total of £6,000 per child. He said the move will save a typical working family with two children under 12 up to £2,400 a year.

Also, leaked this morning was the news that the Chancellor will raise the income tax threshold to £10,000 from April 2014 – a move he said will give 2.4million people at tax cut of over £200 each a year, as well as lifting two million people out of income tax altogether.
Yet while both moves are widely welcomed, they do little to counter the austere measures of previous Budgets, explains Clare Francis, editor-in-chief at MoneySupermarket.com:"Giving with one hand may be a positive, but taking away with the other through other tax increases and benefit cuts means that people are no better off. "In fact, the cumulative effect of this and previous budget changes, combined with wage stagnation and rising living costs means millions are worse off and an increasing number of families are on the breadline, struggling to make ends meet every month."
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