Member News
We examine some key highlights from the Budget statement, including reaction from opposition parties and ePolitix.com stakeholders.
The deficit
The chancellor said the budget deficit was now expected to be £167bn this year rather than the £178bn forecast.
But the Conservatives said Labour had "made a complete mess of the economy".
Darling added that the UK's overall debt would be £100bn less than expected by 2013/14 as a result of the government's measures to protect the economy.
Borrowing will be £13bn lower than forecast in 2010-11 at £163bn thanks to one-off factors such as income from the tax on bank bonuses, the chancellor added.
He said that VAT receipts had come in £3bn ahead of hopes, while higher profits had cushioned the fall in the corporation tax take.
And the chancellor said the UK's structural deficit - adjusted for the highs and lows of the economic cycle - would fall from 8.4 per cent of national output this year to 2.5 per cent by 2014-15 after the toughest spending round for "decades".
Conservative leader David Cameron attacked the government's track record on growth forecasts, saying: "They have given us the biggest bust in British history and now they are promising us a permanent boom."
Stakeholder Response: GMB
Regarding the fiscal deficit, cutting public spending is not on while people who live luxury lifestyles are allowed to get away with contributing nothing at all. This is a time when the UK needs to get back onto fiscal solid ground and closing the tax havens is a key to it. GMB members want an all out attack on tax avoidance and evasion. Everyone must pay their fair share.
First time buyers stamp duty cut
The chancellor has said buyers of homes worth more than £1m are to be hit by a new rate of stamp duty of 5 per cent from next year to fund a temporary scrappage of the tax for first-time buyers.
Alistair Darling said that first-time home buyers will pay no stamp duty on properties worth up to £250,000, which will apply both this year and next, in a direct appeal to younger voters struggling to step on to the housing ladder.
The chancellor said: "The housing market has now stabilised and has begun a slow recovery. But many first-time buyers, particularly those without large deposits, still find it hard to get a mortgage.
"I want to help them, but do so in a way that is properly funded."
He stated that the move will mean that nine out of ten first time buyers will now be exempt from stamp duty.
Conservative leader David Cameron accused Alistair Darling of stealing his party's policy on stamp duty.
He told the Commons: "The only new ideas in British politics are coming from this side of the House."
Stakeholder Response: Council of Mortgage Lenders
The Budget offers a modest potential boost to the housing and mortgage market in terms of reducing transaction costs for first-time buyers, and potentially improving efficiencies for lenders. But as always the devil is in the detail, and the detail is confused. The stamp duty concession in particular looks like a tax loophole waiting to happen.
While the Chancellor rightly welcomes the fact that the government-supported banks exceeded their mortgage lending commitments last year, the Budget was disappointingly light on any detail of how the government proposes to work with the industry as a whole to find a route back to a sustainable and reliable funding framework to safeguard the ability to deliver the lending needed to support future demand.
Stakeholder Response: Michael Ankers, chief executive, Construction Products Association
Over the last couple of years the housing market has been severely hit and although recovery has begun we are pleased that the stamp duty rate holiday for first time buyers has been doubled to properties up to £250,000 in value, as this should boost the housing market further. However, it is also important that support continues for existing schemes, such as Home Buy Direct and Kickstart as these are also important in supporting and encouraging the fragile housing market recovery.'
Stakeholder Response: UKTFA
Construction has been one of the worst affected industries in the UK as a result of the economic downturn, and whilst the timber frame industry has managed to perform better than other methods of housing construction, it has still experienced significant falls in levels of activity over recent years. The Government’s announcement to abolish Stamp Duty on house sales of up to £250,000 for first-time buyers is therefore extremely positive as it will undoubtedly help boost the housing market particularly the construction of new homes. However, standards of construction can often dip after a recession so we must ensure that priority is given to developing affordable, high quality, energy efficient homes.
Stakeholder Response: Ben Stafford, head of campaigns, Campaign to Protect Rural England
Moves that will help first-time buyers into housing are welcome, but do not remove the need for wider action by government to support delivery of appropriately located affordable housing, particularly in rural communities that have been especially hard hit by runaway prices.
Access to affordable housing has been affected by declining rates of house-building which, contrary to the views of some in the house-building industry, owe more to the failures of the market than any problems with the planning system.
Stakeholder Response: Roger Humber, strategic policy advisor on housing to the NFB
Today's announcement has come as a surprise to the whole industry, given the government's unwillingness to extend the earlier stamp duty holiday which expired at the end of 2009.
The chancellor's decision may well grab the headlines, but it will have little impact on the ability to buy. Most buyers are simply frozen out by their inability to raise the required deposit for a property.
Government has recognised the importance of enabling people to buy homes, but more must be done to facilitate first time buyers, and secure the future of the industry.
The central issue remains mortgage supply; lenders must be incentivised to increase lending, many are unwilling to lend more than 75 per cent of a property's value leaving buyers with a significant funding gap.
We call upon the government to continue to drive down the regulatory burden that is slowing the development pipeline. The industry has spent 18 months outlining detailed changes, only now has the government started listening to our advice.
The appointment of a ministerial led initiative is a welcome advance, but action on the issues is more important than words. The longer we delay then longer it will take to recover.
With an election looming we urge all political parties to commit to reducing the regulatory burden on builders and opening up the mortgage market for first time buyers, only with these commitments will the housing market start to grow.
Fuel duty rise 'staggered'
Alistair Darling today said he will stagger the 3p fuel duty increase that was due to hit motorists from the start of next month.
As prices at the pumps continue to approach record levels, the Chancellor said he wanted to "ease the pressure on family incomes".
He told MPs: "Instead of the planned increase, fuel duty will rise by a penny in April, less than inflation.
"This will be followed by a further one penny rise in October and the remainder in January."
But Plaid Cymru's Westminster leader Elfyn Llwyd MP said the increase in fuel duty would "punish hard working families"
"The price of petrol at the pump has risen significantly since early February and is starting to be strongly felt by people from all walks of life," he said.
For many people who rely on their car for work or family life, this is a heavy and unexpected burden at a time when they are economically stretched.
"Labour will soon have pushed fuel duty up by 17 per cent in barely two years, well above inflation.
"We need to be supporting struggling communities and industries or we risk damaging a very fragile economic recovery. This unfair fuel tax is another example of an uncaring, out of touch government.
Darling also announced £100m of funding to help with pothole repairs since the cold winter.
And a further £285m will be spent on facilitating the use of hard shoulders during congested periods on motorways.
Stakeholder Response: Freight Transport Association, policy director, James Hookham
We were prepared to give Mr Darling some credit for the decision he announced on fuel duty. What we've discovered on closer inspection, though, is that we've been sold a dud. Any cost saving the staggering of the fuel duty rise may have given the logistics sector has been all but swallowed by the loss of the biofuel differential.
Strong cider and alcopop tax hike
Cider drinkers will be rushing to the off-licence to stock up on Scrumpy Jack and Strongbow, after the Chancellor announced duty on cider will increase by ten percent above inflation on Sunday.
He said: "There is a long-standing anomaly which has meant cider has been under-taxed in comparison to other alcoholic drinks."
"I intend to correct this. So duty on cider will increase by 10 per cent above inflation from midnight on Sunday."
"In September changes will be made to the definition of cider to ensure specific strong ciders are taxed more appropriately."
And duty on beer, wine and spirits will also increase from midnight on Saturday.
"Alcohol duties will also increase by 2 per cent above inflation for two further years from 2013," he added.
But David Cameron accused the chancellor stealing his party's ideas on raising duty on cider.
"Once again, they've been caught taking the public for fools," he said.
Stakeholder Response: Homeless Link
Homeless Link welcomes the Budget's increase in the tax on high alcohol cider. Our members see every day the negative impact and deterioration in health of homeless people caused by super strength alcoholic drinks. We would like to see this extended to high alcohol lager.
Government extends youth training pledge
The chancellor announced further measures to tackle youth unemployment by extending until March 2012 a guarantee of a job or training for every 18-24 year-old after six months out of work.
Alistair Darling said nearly four million people had been helped out of unemployment in the past year, adding that the claimant count was lower than when Labour came to power in 1997.
He added: "That has not happened by chance - it has happened because of choices we have made. We responded with an extra £5bn to help people find work quicker. Our approach has made a difference."
Initially the pledge was due to run until March 2011.
For those over 60, Darling announced that he will reduce the number of hours they need to work to qualify for working tax credits.
And he said the government is looking into scrapping the compulsory retirement age.
Stakeholder Response: Association of Learning Providers
The Association of Learning Providers warmly welcomes the announcement that the Young Person's Guarantee is being extended to March 2012. It is important however that 16 and 17 year olds unemployed youngsters, the youngest members of the NEET group, have continued access to a well-funded Entry to Employment programme, which has proved to be very effective and is delivered by many voluntary sector training organisations.
Stakeholder Response: LSN
At LSN, we believe that tackling the thorny issue of our unemployed youth is vital, yet one that is fraught with complexity.It is certainly the case that young people aged 16 to 25 have felt the full force of the latest recession. Whilst a key feature of this recession has been that many employers have tried to retain their existing workforce, they have also cut back or frozen new recruitment, thus hitting young people disproportionately.
LSN believes that it is therefore crucial not just to have short-term funding but that the Chancellor moves to a more sustainable and innovative model of funding for learning and skills. We at LSN strongly believe that further education should be put on par with universities, which have much more flexibility and where student loans contribute to funding.
Crackdown on tax evasion
If there was ever any doubt that this was a Budget designed to be the launch pad of an election campaign, the naming and shaming of Belize as a tax haven put that to rest.
Labour MPs roared with delight as Alistair Darling used his Budget statement to specifically - if not explicitly - single out the tax status of Conservative Party vice-chairman Lord Ashcroft.
The chancellor said that it was unfair that "some people" were escaping their tax obligations.
"I am determined to continue our successful drive to prevent avoidance and evasion," he said.
"Measures in this Budget will bring in additional tax worth half a billion pounds each year, while protecting £4bn worth of revenues by 2012-13."
"These steps include tax agreements like that already signed with Liechtenstein, which is expected to bring in around £1bn of extra revenue."
"I can also now tell the House that we are ready to sign tax information exchange agreements with three additional countries - Dominica, Grenada and Belize."
Time appeared to stand still between the words "Grenada" and "Belieze" as Labour MPs roared with delight at the news that the government intended to crack down on tax havens.
Small businesses
Alistair Darling said that at the "heart" of his Budget was a £2.5bn one-off growth package to help small business "promote innovation, invest in national infrastructure and key skills."
"This package will be paid for by switching spending from within existing allocations and the extra proceeds from the tax on bank bonuses - in line with a Budget that is balanced over the period."
The chancellor also announced that he wanted the big state owned banks to lend more to small businesses while defending their record so far.
""As recovery gets underway, we need to ensure viable SMEs continue to get the credit they need," he said.
He told MPs that RBS and Lloyds had lent £38bn to small and medium sized businesses in the last year.
"Over the next year, I have agreed that RBS and Lloyds will provide a total of £94bn of new business loans - nearly half to SMEs," he said.
But Liberal Democrat leader Nick Clegg said banks were in fact "hoarding money" that should be rightfully lent to business.
"The failure to get banks lending again is the absolute centrepiece of the government's economic mismanagement," he said.
A new body, UK Finance for Growth, will also be set up to oversee the development of the government's £4bn stock of finance schemes for smaller firms.
Ministers said it will help streamline the government's existing schemes and oversee a new Growth Capital Fund.
The fund will provide finance for smaller firms looking for between £2m and £10 m in growth capital.
Business secretary Lord Mandelson said: "This is a budget for business, innovation and skills. It is a budget for jobs - both now and in the future. At its heart are SMEs, the real heroes of the recession and the backbone of the recovery.
"Helping British businesses access the finance they need to grow is crucial to protect and advance our economic recovery.
"That is why we are streamlining our financial assistance under the one body, UK Finance for Growth, and are ensuring that creditworthy smaller firms who believe they have been wrongly refused bank finance will have a strengthened avenue of appeal.
"We want to ensure that all businesses, but particularly smaller companies, receive the support they need from all sectors to ensure they reach their full potential."
But Tory leader David Cameron said the economy remained stagnant despite all the claims made by the chancellor and the prime minister.
He said: "Our economy is stuck, business is stuck, nothing is moving and there is the arrogance of it. 'Stick with me.' Why? 'Because I doubled the debt, I put up your taxes, I wrecked the economy, I mortgaged your children's future'.
"It's like the captain of the Titanic saying 'Let me command the lifeboats'.
"It's like Robert Maxwell saying 'Let me reinvest your pension'.
"It's like Richard Nixon saying 'I'm the man to clean up politics."
Stakeholder Response: British Retail Consortium director general, Stephen Robertson
We welcome exempting businesses with a rateable value up to £6,000 a year from business rates for 12 months. This is useful assistance for the smallest shops.
But it makes no difference to established retailers, the ones providing most of the UK's three million retail jobs. The Chancellor has offered them no new help with the big bills coming from increases deferred from last April, revaluation coming in this April and Business Rates Supplements.
Retailers inevitably use a lot of property. They already pay a quarter of all the £24 billion a year raised in business rates – more than any other sector.
He should be making business rates more affordable for all retailers. And we need compulsory business ballots to prevent Business Rates Supplements being abused by local authorities and a restoration of rates relief on empty properties.
Stakeholder Response: Phil Orford, chief executive, Forum of Private Business
While it's clear that the Government has been listening to our messages about small businesses in the recovery, there's a sense that this was a budget for an election and the Government is courting the small business vote.
It would have been more encouraging to see some real political responsibility and measures to address difficult issues, like public sector pensions, which we need to tackle in order to keep the UK competitive in the longer term.
My initial reaction is that there was quite a bit of give, give, give in the Budget but nothing new - and nothing to address the serious issues this country faces.
Of course, I would give a cautious welcome to the way the Chancellor acknowledged the importance of smaller businesses to economic recovery. The small business-friendly measures he announced should be helpful – HMRC's Time to Pay scheme and prompt payment by Government bodies emerged as the two most popular forms of Government support in a survey of our members this month.
The creation of an adjudicator for firms to go to when they are denied credit by the banks should be useful. But more importantly, we need a clear signal from the banks within the next few days as to how they are going to deliver these new commitments to small business lending - specifically relating to the risk assessment criteria they apply to borrowing applications.
Stakeholder Response: Michael Ankers, chief executive, Construction Products Association
The support for SMEs, such as the credit complaints adjudicator and the UK Finance for Growth scheme, are to be welcomed and we agree with the Chancellor that successful SMEs are a crucial part of the country's economic prosperity. For too long the credit facilities for SMEs have been detrimental to their ability to survive and grow, therefore assessing fair bank behaviour and increasing support is very important for the countries recovery.
Stakeholder Response: Karen Price, chief executive of e-skills UK
Employers across the IT sector view investment in technology skills as central to creating employment growth in the UK. Technology underpins every growth industry and the IT professional workforce itself has continued to grow despite the recession. 110,000 people a year are needed to join the IT professional workforce, and it is forecast to grow at four times the UK average for the next decade.
Stakeholder Response: LSN
The Government's present emphasis on growth, as reiterated by the contents of Wednesday’s budget, is welcomed and much needed in the current climate. At LSN, we believe it is vital that investment in skills is viewed as an integral part of the path to economic recovery and, as such, spending on skills development is not reduced in the present climate of cost cutting.
Stakeholder Response: East of England Development Agency
EEDA already supports over 100,000 businesses every year with £30 million of business support, skills and innovation funding available through our innovative Business Map. As a business-led organisation we've been working hard with business leaders in the East of England and government to make the case for extra support for small businesses and today’s announcements will help us build upon this work.
'Bank accounts for all' planned
The chancellor announced that everyone in the country will be guaranteed a basic bank account.
He said that since 2003, the number of people without a bank account has been halved.
"This will mean, over the next five years, up to a million more people will have access to bank accounts - something essential in the modern world," Darling said.
The guarantee is expected to combat financial exclusion.
He also announced that the annual ISA limit will rise from £7,200 to £10,200, of which half can be saved in cash.
ISA limits will increase annually in line with inflation.
Stakeholder Response: Investment Management Association, chief executive, Richard Saunders
The ISA is and should remain the key non-retirement savings vehicle for all. We therefore welcome the government's announcement that the limit will increase each year in line with inflation.
We shall continue to discuss with the Government how it can build on the strength of the ISA brand and the simplification of the pensions landscape to create a coherent savings scheme for all, providing instant access, limited access and retirement income".
Green investment fund unveiled
Britain's world-leading green technologies will get a boost with the formation of a new Green Investment Bank, controlling £2bn worth of equity.
Half will come from the asset sales, including the Channel Tunnel rail link, with the rest matched by private investment.
"This equity will unlock billions more of finance from the private sector," Darling told MPs.
"The fund will focus first on investing in green transport and sustainable energy, in particular offshore wind power, where Britain is already the world-leader."
Stakeholder Response: Michael Ankers, chief executive, Construction Products Association
Whilst we welcome the support for a Green Investment Bank and investment in renewables, the big disappointment was the lack of any help for households to improve the energy efficiency of their homes. We have consistently called for the government to extend both the list of energy saving products that are eligible for a lower rate of VAT and the boiler scrappage scheme. We are therefore very disappointed that both of these suggestions have been ignored by the government, as these really would have given a clear indication of the government's desire for a more sustainable future.
Stakeholder Response: Ben Stafford, head of campaigns, Campaign to Protect Rural England
The confirmation of funding for a Green Investment Bank is positive, but it will need to invest in the right things in the right places.
We are encouraged by the Chancellor's prioritisation of green transport and sustainable energy. We hope this will mean subsidies for low carbon car clubs, making the latest technologies available to hard-pressed households - in both town and country - that cannot afford to buy a new car, let alone a low carbon one.
Stakeholder Response: Professor Steve Evans, chair of the IET Manufacturing Policy Panel
There is an enormous opportunity for the UK to take a global leadership role in low-carbon manufacturing and low-carbon technology. We have got great universities and a long tradition in innovation and engineering. In order to achieve a low-carbon economy, however, government has to create the right environment for investment into the low-carbon industrial sectors of the future.
Stakeholder Response: Commission for Rural Communities
The Green Investment Bank will invest in the low-carbon sector where the equity gap is expected to be most critical, and this too could lead to a boost to rural economic growth. We would encourage the government to include the funding of community scale renewable schemes as part of the investment opportunities offered by the Bank.
Dods Parliamentary Communications Ltd