IFS warns on Osborne Budget plans

%VIRTUAL-SkimlinksPromo%Chancellor George Osborne may have difficulty in making his Budget sums add up, a leading economic think-tank has warned.

The Institute for Fiscal Studies said he was relying on "uncertain" revenues from a crackdown on tax avoidance and an increase in the bank levy to fund a series of giveaways in his Autumn Statement yesterday.
Mr Osborne told MPs that the measures he had set out were "fiscally neutral" - leaving the overall level of projected Government spending unchanged.

However, IFS director Paul Johnson said the Chancellor's cuts in fuel duty, employers' National Insurance contributions and business rates, and his introduction of a tax break for married couples would cost the Exchequer around £2.5 billion a year.
The increase in the bank levy is only expected to raise around £500,000, while the new anti-avoidance measures are slated to bring in an "inevitably uncertain" £1 billion - leaving a £1 billion shortfall.

At the same time, the Treasury is assuming that the £750 million a year cost of the Liberal Demorcats' free school meals for five- to seven-year olds will be swallowed up into the "overall spending envelope" from 2016-17 - which would mean even deeper cuts in other spending.

"The Chancellor continues to make specific promises on spending increases whilst stating that he will keep total spending at the same level. He can't keep doing that," Mr Johnson said.

"Whilst the costs of his tax cuts are pretty definite, the benefits from his anti-avoidance measures, and indeed of the increase in the bank levy, are rather less certain."

Autumn Statement 2013 - who were the winners and losers?
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IFS warns on Osborne Budget plans

Next year's fuel duty rise has been cancelled. Instead of petrol taxes rising by 2p a litre, they will be frozen. Chancellor George Osborne claims the move means petrol will be 20p a litre less than under Labour's plans.

It's goodbye to the British tax disc and all that tricky perforations nonsense from October 2014. Motorists will need to register your tax disc online in a push to a paperless service. If you fail to register, your car can still be tracked by traffic cameras.

There were a couple of things for families. First was the Married Couples Tax Allowance. This will allow married couples and civil partners to transfer £1,000 of personal tax allowance between them. It will only apply where one of the couple earns less than the £10,000 personal tax threshold. They can give some of their allowance to the higher-paid member of the couple, who will then save £200 in tax on another £1,000 of their income. However, it will only apply where the higher-earning member of the couple is a basic rate taxpayer - which as of April will mean earning less than £41,865. It's thought that 4 million families will benefit.

The small business rate relief scheme will be extended for one year from April 2014. Inflation increase in business rates will be capped at 2% from April 2014.

New reoccupation relief will encourage the use of vacant town centre shops, halving rates for new occupants. There will be a discount on business rates worth £1,000 to every retail premises in England with rateable value up to £50,000.

It was generally good news for those close to the retirement, with pensions going  up in line with inflation - adding £2.95 a week from next April. There was also good news for those pensioners who currently do not qualify for the state second pension. A new rule will enable them to make voluntary National Insurance Contributions to build up their entitlement to the second state pension in retirement. Assuming they can afford this, it could dramatically increase their income in retirement.

There was also disappointment for parents of the more than 6 million children with Child Trust Funds (CTFs), which are said to be in "terminal decline" since the introduction of Junior Isas some two years ago. The interest rates and returns on CTFs have been falling sharply since the scheme was effectively ditched by the government.

But those with CTFs are stuck with them unless the government allows transfers into Junior ISAs, and Osborne said nothing about making this possible today.

For those retiring in years to come, the news was less positive, because people will have to wait much longer to receive their pension. We already knew that state pension age will rise to 66 in 2020 and 67 in 2028. This will not change. However, after this date, the state pension age was set to rise to 69 over the following two decades, but Osborne has brought this forward by establishing a rule to ensure that people spend no more than a third of their life drawing a state pension.
Osborne also introduced Capital Gains Tax on sales of second homes in the UK for those who live overseas – essentially putting them in the same position as those Brits who own a second home in the UK. From 2015 he said the government will introduce CGT on future gains.

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