Pound falls as Chancellor misses deficit target and is forced to cut growth predictions in Budget 2016

The Chancellor of the Exchequer used his eighth budget to talk about almost anything other than the performance of the economy under his stewardship.

 

Having previously proclaimed the strength of his long term plan and how he’d insulated Britain from world events, in sharp contrast to the optimism of the Autumn Statement of only four months ago, we were told of gloom in the world economy and a series of missed targets and revised forecasts.

 

Once again he has missed his deficit reduction and debt targets.

 

The Office for Budget Responsibility has also cut the growth forecasts for the UK economy over the next five years. It was previously forecast to grow by 2.4% this year but this has been revised down to 2% and the OBR has also cut the forecast for UK productivity growth. The Pound promptly plunged against the Dollar on receipt of this news.

 

There was some rare good news for Birmingham with the announcement of £14 million for a new city centre, creative industries campus run by Birmingham City University. However there was no mention of any measures to tackle the skills shortage and persistent unemployment in Birmingham’s suburbs and all the big investment announcements have to be set against a history of such announcements where only 114 projects of the 565 he has previously announced have actually started.

 

Small businesses have welcomed the decision to make permanent Rate Relief provision for Small Business which will see those with a rateable value of less than £12,000 pay no business rates.  Good news for that sector but it has been estimated that this will cost local authorities about £7 Billion, money which the Chancellor promised them when he announced the right to retain Business Rates in his autumn statement.

 

Many of the other measures seem like one step forward and two steps back such as the decision to reduce Capital Gains Tax which he increased in his 2010 budget or the imposition of a levy on insurance premiums to pay for flood defences after he’d previously cut the flood defence budget.

 

One of the centre pieces of his tax changes is the plan to raise the personal tax allowance to £11,500 by next April but it has been pointed out that 85% of that tax cut goes to the top half of earners with a third of it enjoyed by the top 10%.

 

The budget claim that seems to have confounded most experts is how a Chancellor who consistently misses his targets hopes to turn £21.4 Billion of borrowing in 2018/19 into a surplus of £10.4 Billion by 2019/20.

 

One surprising and welcome measure was the introduction of a Sugar Levy on fizzy drinks to tackle childhood obesity although that promptly sent the value of Tate and Lyle shares tumbling.

 

Steve McCabe MP said:

“George Osborne’s budget offered very little good news to my constituents where we’ve just been told that unemployment has risen for the third month in a row. I saw no measures in the budget to improve skills or to help the majority of people get on. 

 

“The Tory Economic Plan for Birmingham is costing us dear. It’s not so much a long term plan as a series of endless ploys which aren’t working and the cracks are now showing.”

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