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Budget offers "small beer" to the region
GEORGE Osborne was accused of offering small beer to a region hit by recession and plunging living standards – despite slashing 1p off the cost of a pint.
The Chancellor also cheered motorists, homebuyers, taxpayers and small business leaders, in a Budget that appeared to avoid repeating last year’s ‘omnishambles’.
At its heart, was an eye-catching ‘Help to Buy’ loan scheme to ensure an expected 215,000 people, every year, can find the hefty deposits now demanded by mortgage lenders.
In the North-East, people would be able to buy a typical first home with a deposit of just £5,000 – a five per cent deposit, Mr Osborne suggested.
But the goodies could not disguise the gathering gloom of a stagnant economy, racked by miserable growth, soaring debt, falling wages – and with deeper spending cuts to come.
The independent Office for Budget Responsibility (OBR) reported that:
- GDP growth is forecast to be a puny 0.6 per cent this year – half the 1.2 per cent predicted just three months ago.
- The economy has grown by just 0.7 per cent since the 2010 spending review - compared with the 5.3 per cent forecast at the time.
- Real wages are set to fall by 2.4 per cent over the Parliament – meaning people will be worse off in 2015 than when the Coalition came to power.
- National debt as a percentage of GDP will not start falling until 2017-18 – a further one-year delay, breaking one of the government’s key rules.
Labour leader Ed Miliband tore into Mr Osborne, saying: “He predicted living standards would rise over the Parliament. But wages are flat, prices are rising - and families are squeezed.”
But there was not a flicker of ‘Plan B’ in the Budget, as the Chancellor explicitly rejected all calls – including from Vince Cable – for a spending splurge.
Instead, Mr Osborne vowed to press on with the “painstaking work of putting right what went so badly wrong” – insisting there were no quick fixes.
There was mixed news for the region, as the Treasury agreed to stump up £10m towards the cost of bringing the 2014 Tour de France to Yorkshire.
However, ministers threw out a bid for a groundbreaking carbon capture and storage (CCS) project in Teesside – opting for Aberdeenshire and the Drax site, in North Yorkshire, instead.
Mr Osborne also announced:
- A new “employment allowance” to cut every firm’s National Insurance bill by £2,000 from 2014 – with 450,000 small businesses to pay none at all.
- The income threshold above which people start paying tax will rise to £10,000 in 2014 - a year earlier than planned.
- The so-called “beer duty escalator”, annual rises of two per cent above inflation, will be scrapped – with duty also slashed by 1p from Sunday night.
- A 3p fuel duty rise planned for September will be scrapped – at a cost of a cool £480m this year.
- Higher departmental current spending cuts of £11.5bn in 2015 – up from £10bn.
- A one-year extension to the one per cent cap on public-sector pay, through to 2016.
- A two-year delay to a promised £3bn for new infrastructure schemes, to 2015.
- A doubling in size of tax-free loans for commuters to buy rail season tickets, to £10,000.
‘Help to Buy’ will target first-time buyers, and people trying to move up the housing ladder. Buyers will put down a five per cent deposit on a newly-built home worth up to £600,000, with 20 per cent of the cost funded by a “shared equity” loan, repayable when the home is sold.
Separately, the government will guarantee £130bn of home loans, to persuade lenders to offer deals with deposits as low as five per cent, on new and existing properties.
But the Treasury was immediately warned it risked creating another “housing bubble” – pushing prices up at the expense of buyers and destabilising the economy.
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