19 March 2015Budget 2015: an attempt to win back traditional Tory voters
In the lead up to his last budget before the general election, the Chancellor George Osborne promised there would be no gimmicks or giveaways.
However with an election looming and the Conservatives desperately needing a successful pre-election launch pad, there was never any doubt that the budget would be shaped by election politics.
Taxes on savings will be all but abolished, pensioners will be freed from restrictive annuities, low-income workers will pay less tax and first-time buyers will be handed up to £6,000.
While support for first-time buyers has captured the headlines, make no mistake that this is a budget for the middle class and specifically retired middle class voters as the Conservatives attempt to woo older voters and claw back support from UKIP.
The economy is continuing to recover and is in better shape than when the Conservatives came to power in 2010. The deficit has halved since 2010 as a share of national income and borrowing is set to continue falling before reaching surplus in 2018/19. The chancellor claims that more people have jobs than ever before and that living standards are the best they've been since they came to office.
Government policy obviously influences the economy, however it's not the only factor that determines the health of an economy. Consumer choices, business and international affairs all play a part.
In order to stay on the track set out, an additional £30 billion savings is needed in the next parliament. The Chancellor said these savings will come from government departments, a lower welfare bill, clamping down on tax avoidance and the sale of £13 billion Northern Rock and Bradford & Bingley mortgage assets.
The government's own analysis of ISAs shows that the over-65s are the biggest winners in this budget. Despite the fall in unemployment and rise in living standards, the under-25s have benefited the least from the economic recovery.
Savers and pensioners will get new tax cuts and support. The first £1,000 of interest earned on savings will be tax-free from April 2016, subject to MPs voting for this in next year's Finance Bill. ISAs will be fully flexible so savers can withdraw money and put it back later in the year without losing their tax-free allowance. Pensioners will be able to trade in their annuities for cash, with the 55 per cent tax charge abolished.
By 2020, first-time home buyers will get up to £3,000 on £12,000 savings if they put those savings into a Help to Buy ISA account. The intention of this new scheme is to help people cobble together the deposit needed to get on the property ladder. However its success remains questionable as it does nothing to address the root cause of unaffordability – the chronic undersupply of housing, which has seen prices soar.
It is encouraging to see the government offer further support to married couples by increasing the transferable tax allowance to £1,100.
Churches have been given much need support with the £15 million church repair roof fund set to increase to £45 million. And charities will benefit from the automatic gift aid limit being extended to £8,000.
It's crucial that we shift our habits towards savings rather than spending everything and more. So in this regard it is good to see the government encourage and reward good savings habits. However, despite apparent increases in living standards and more jobs, people continue to struggle to pay for the basics. The budget has done little to address this social problem.
While the new help-to-buy scheme will offer much needed support to some people desperate to get on the property ladder, the budget offers very little if anything to those truly suffering from a lack of affordable housing –people languishing on social housing waiting lists, those relying on temporary accommodation and the homeless.
There is no doubt that the Chancellor used the budget as an electioneering tool. And on 7 May voters will head to the polls and voice their opinion through one of the strongest democratic tools – voting in the next government.