Budget 2014 as-it-happened
Previewing the Budget
08:08 – Good morning. It's Budget day, the most dispiriting event in the political calendar outside of party conferences. How many swigs of water of will George Osborne take? Will his voice hold out for the full statement? Can Ed Miliband make himself heard over the heckling of Tory backbenchers? All these important questions will be answered in the next few hours. In a moment we'll be bringing you the key issues to look out for. Then we'll cover PMQs, the Budget statement and Miliband's response minute-by-minute from midday. And we'll be bringing you the political analysis of what's been said immediately afterwards. Brace yourselves, lest the excitement become too much. The usual caveats apply: There will be typos and factual inaccuracies, which will be carefully corrected once the live blog has been put to bed. Also: sarcasm and mild existential despair. We apologise in advance.
08:56 – It's been two years since the omnishambles Budget, which, funnily enough, was the last time the Tories enjoyed a poll lead. Has anything changed? Well, hopefully the Treasury will have stress-tested the Budget measures announced today into oblivion to avoid any of the granny tax or pasty tax disasters that hit the 2012 Budget. Just as importantly, the leaks seem to have been controlled. In 2012, so much of the Budget had been leaked that when the document was eventually published the press had the time and inclination to take a magnifying glass to that which hadn't been – invariably the negative stuff. This time the leaks have been delivered at a modest pace ahead of Budget day and Tory sources are clear there's a big surprise in there somewhere to wrong-foot Ed Balls and Miliband.
09:06 – What could the surprise be? Hard to tell. Lord Lawson has called for a cut in the basic rate of income tax. That would directly tackle Labour's plans to reintroduce a 10p starting rate and play well with the blue-collar worker narrative that can be seen elsewhere in the document. It's possible Osborne will cut national insurance or VAT as a way of getting money back into people's politics. But Osborne's central problem remains: politically he has to stick to a cautious message about the economy, or else people might drift back to Labour. And if caution is the name of the game, major tax cuts shouldn't be on the agenda. The fact that pre-briefings on the Budget have repeatedly used the word "resilience" suggests that the big surprise won't involve a major tax cut.
09:13 – The major announcement this morning was the new pound coin, a 12-sided version shaped like a 'threepenny bit'. I have literally no idea what that is, which means that the nostalgia is not aimed at people under the age of 50. Apparently the new coin will be the most resistant to counterfeiting in the world. Is it too much of a leap of imagination to suggest it might play well with older voters flirting with Ukip? Perhaps.
09:30 – What else has been pre-announced? Well we know that the right-to-buy scheme, the weaponised policy designed to drive economists into despair, will be extended for another four years. The hope is that its benefits will filter into the rest of the economy, in a boom for house-building with consequent benefits for construction and supply factories. There will also be extra money for flood defences and a requirement that banks send rejected applicants for loans to alternative lenders. Osborne will also give more details of a five-year cap on structural welfare spending.
09:35 – One measure we're expecting is a 20% cut in bingo duty. For 80% of the population that means less than nothing, but bingo companies have assured the Treasury they'll pass the savings onto punters in the form of bigger cash prizes. That makes it the kind of targeted, colourful Budget measure a small group of voters might actually remember when they go to the ballot box. And it's not even that small a group. One petition calling for the change won 340,000 signatures.
09:40 – The bingo move demonstrates the blue-collar message Osborne wants to get across – a tribute to the growing influence of Tory backbencher Robert Halfon and his 'white-van-man' form of Conservatism. It's also a sign of the growing strength of the Renewal group and Osborne adviser Neil O'Brien. The Lib Dem pre-announcement of a £2,000 childcare tax break – which Clegg make a lot of noise about yesterday in exchange for not leaking today's surprise – plays into that narrative.
09:43 – In that vein, the chancellor is also under pressure from Lib Dems to announce an increase to £12,500 in the personal income tax allowance from 2015. It's currently set to rise to £10,000 from April next year. This is the big Lib Dem achievement this parliament. It stood at just £6,475 for under-65s when the coalition came to power. They probably won't get the £12,500, but it should rise to £10,500 in 2015/16.
09:53 – The pressure from Tory backbenchers is in a different direction. They want Osborne to do something to prevent more people being sucked into the 40% tax band. The point at which you enter it has steadily fallen from £43,876 in 2010/11 to £41,451 now. Many backbenchers want it ratcheted back up to £44,000. He's unlikely to do it – for now at least. It plays directly into Labour's attacks and the focus is likely to remain on lower earners. But there are still two Budgets to go until election day and Osborne is likely to keep this option in his back pocket in case he needs to galvanise Tory-inclined voters in 2015.
10:03 – Corporation tax usually gets a cut this time of year. That trend might come to a halt this year. It's due to hit 20% in 2015, which is what most Treasury people consider optimal, although there's plenty who would disagree with them, in either direction. Osborne may instead opt to scrap the employers' part of national income tax for under-25s. That would be business friendly and make a convincing case for helping to tackle youth unemployment. There's already an exception for under-21s, which comes in next month.
10:11 – Oh yeah, and those growth and deficit things. Much brighter than last year, as you may expect. Growth forecasts for 2014 will be revised upward to at least 2.7%, possibly even above three per cent. The 2015 forecast will probably be upgraded from 2.2% to 2.5%. As for what that means for the deficit, the Treasury believes that every one per cent of economic output translates into a decrease in public borrowing of 0.5% of GDP in the first year and 0.2% in the second. If that's right, public sector borrowing should be close to the Office of Budget Responsibility (OBR) November forecast of £111 billion for 2013. It may be revised down from £96 billion to £93 billion for 2014/15.
11:46 – OK, we're switching attention to the Commons now, where we'll be looking in throughout PMQs, the Budget and the Miliband response. That should take us through until about 2pm, so if you have any serious drugs on you now would be a good time to take them.
11:48 – Alistair Carmichael, Scottish secretary, is currently batting away Scottish questions. He is smart and eloquent, but there is a definite anaemic quality to the way he talks, like someone just emerging from sleep. As you can imagine, most questions are on Scottish independence, or framed in relation to it.
11:53 – Fred Flinstone. That's who Alistair Carmichael looks like. Fred Flintstone. That was really bothering me.
11:54 – Also, can we celebrate the way the word 'world' sounds when said with a Scottish accent? Like three or four extra, rather wobbly letters are added between the r and the l.
11:59 – There's a lot of talk about what this surprise is that Osborne's lodged in there. He's hyped it quite a bit now – it'll be interesting to see if it lives up to it. Plenty of people are trying to get a glimpse of the Evening Standard front page – they're briefed before anyone else, on condition of strict confidence, because they go to press early.
12:01 – And we're off. Cameron starts by paying tribute to Tony Benn. "Alongside a record of public service, he was a great writer, a great campaigner, no matter if you agreed with his views or not." He says his thoughts are with Hilary, his son, who still sits in the Commons.
12:03 – Cheryl Gillan (Con, bank manager) says unemployment has fallen, to cheers from the Tory benches. She wants the government to… wait for it… continue to tackle the deficit. Cameron waxes lyrical about the chance of "dignity" for workers. Miliband is up. He says the death of Benn marks the "loss of an iconic figure of our age. He spoke his mind and he spoke up for his values. Everyone knew where he stood."
12:05 – Miliband asks if Cameron agrees the Crimea referendum was illegitimate and illegal and asks about reports of military movement. Cameron agrees. "This is the annexation of one country's territory by another country. We must be clear of our interests, which is a rules based system." Cameron says he'll work with Europe and the US for a strong and consistent response.
12:06 – Miliband asks the circumstances in which the UK would support additional wider economic and trade sanctions. Cameron says the EU provided triggers – taking part in a contact groups – then there would be asset freezes and travel bans. That's happening. More will come at the Council of Ministers on Friday. Cameron says they warned that if there were more actions to destabilise Ukraine, more would follow. More has happened and therefore more will follow. If Russia moves into eastern Ukraine, there should be economic sanctions.
12:08 – Miliband says he can rest assured of Labour's support. He wants the next meeting of the G8 to suspend Russia. Cameroon says it can't go ahead as planned. He supports the G7 meeting. "It's important we move together with our allies and partners," he adds. He'll talk with allies to see if that should be temporary or permanent. And with that Miliband ends his first set of questions. I think he has three left, which will probably be party political.
12:10 – Gerald Kaufman (Lab, weary soul) talks of a Palestinian friend who has had friends killed by Israel. Did Cameron raise the constant stream of killing of Palestinians with the Israelis? Cameron says he didn't raise that specific case but did talk about how Israelis behave in the West Bank and settlements.
12:12 – Sir Alan Haselhurst (Con, like a fading painting in an attic) says there is a need to stem the continuing flow of the population to the South East by "imaginative measures". Cameron says HS2 will help rebalancing.
12:15 – Miliband again. He says mental health services are under threat. Does the PM agree it should have equal priority with physical health. They're still in consensual mode. Cameron celebrates a debate held by MPs. He agrees it should have parity. Miliband moves onto specifics. Mental health share of NHS budget is falling, he says. Jeremy Hunt shifts in his seat uncomfortably. Does the PM agree this shouldn't be happening? Cameron says he's increased health spending and legislated for parity.
12:16 – "The money is there, the legal priority is there," he says. Miliband replies that the mental health budget has fallen for the first time in a decade. He urges him to look at the specifics and make sure the judgements made in the Commons are carried through across the country. Why not add mental health to the NHS constitution? Cameron says it's important that we see parity not just in esteem but on the ground. It's important stuff, but unlikely to get backbenchers going. My hunch is Miliband knows that the PMQs before the Budget is a pointless one to win, as it will receive no coverage. So instead he's opted for this mild nudge on Ukraine and mental health.
12:19 – Albert Owen (Lab, hesitant) said Clegg wrongly made assurances to the Commons about childcare last week. Clegg shakes his head. Will he get a grip? "The honourable member is wrong on both counts," Cameron says.
12:21 – Bob Stewart (Con, would rather be on the battlefield) warns of Russian aggression. Is it possible that we could have a new maritime patrol aircraft before the next defence review? Cameron makes the cut and paste point that the only reason these discussions are possible because of financial restraint in defence. Stephen McCabe (Lab, grey) says there are 22 Tory tax rises – it's a whip's question. Cameron reminds him that they said they planned to reduce the deficit using 20% tax increases and 80% spending cuts. He also points out, not unfairly, that Labour wouldn't undo any of them.
12:24 – Chris Pincher (Con, always looks like he's about to drunkenly punch someone) highlights the manufacturing recovery in the Midlands. Cameron seizes on it like a happy puppy. Kerry McCarthy (Lab, homely) says Benn was from a privileged background but he fought for working people. With the cost of living crisis, why is it Cameron is obsessed with plans to bring back foxhunting? Dreadful question. Cameron agrees with her on how hard Benn worked his constituency caseload. He says getting people back to work is the best way to help the poorest in the UK.
12:29 – David Ward (Lib Dem, wrinkled paper) asks if the PM is confident we're doing enough to make young people aware of apprenticeships? Cameron says he makes "a very important point". There are many important points made during PMQs, apparently. Ian Murray (Lab, protracted face) says we're not in it together, given the pay rise for special advisers. "It's 12:30 and 39 seconds and not a single Labour MP mentioning the job figures today," Cameron says.
12:34 – Ok, here we go. Osborne is up.
12:35 – Osborne starts bleak. We don't work enough or spend enough or make enough. "If you are a doer or a maker this Budget's for you." Christ. If that's the standard we're in for it's going to be a long hour.
12:36 – He says he won't refrain from telling the truth – they'll do more to bring the deficit down, to boost exports, to grow manufacturing – even though things are doing relatively well.
12:37 – "We make sure hardworking people keep more of what they earn and more of what they save," he says. "Support for savers is at the heart of this Budget."
12:37 – Growth in 2014 is forecast as 2.7%. That's at the bottom end of expectations.
12:38 – The OBR also predicts that Britain will reach the point that its economy is larger than in 2008 later this year.
12:40 – The OBR also warned that the Ukraine crisis could lead to lower growth. Osborne is putting it to Labour as often as possible. He is struggling to control his cockiness. There has been a 24% fall in the unemployment claimant count in just one year, he says. The OBR is forecast one and half million more jobs. Earnings should grow faster than inflation this year.
12:41 – The IMF now say we are achieving the largest reduction in the headline and structural deficit of any major economy in the world. The OBR revised down their underlying deficit in every year of their forecast. It was 11% in 2010, 6.6% this year. Next year 5.5%, then 4.2%.
12:43 – There will be more cuts, Osborne warns. "The question for the British people is 'who has the credibility to deliver them?" There's his election mantra right there. The OBR has revised down the national debt to 73% next year, 77% is 2016 and then falling to 78.3% in 2016/17 and continuing to fall thereafter.
12:45 – Osborne is making this a real lap of honour. He is toeing the line between jubilation and sobriety.
12:46 – Osborne says the £1 coin is particularly vulnerable to forgery. So "I can tell the House" (actually he told Twitter first) that there is a new £1 coin. It will take "inspiration from our past", he says.
12:48 – Many chancellors would "squander the gains" presented with what he's got, Osborne says. That could be used against him in 2015. He says the Budget is neutral overall – everything is paid for. Britain needs an absolute surplus in good years. "We will fix the roof when the sun is shining." Cuts in the next parliament will involve a new charter for budget responsibility. On public service pensions the reforms of John Hutton have been implemented. Schemes need to be properly valued and they will be. Pay restraint in the public sector will continue. Management of departmental finances will remain "prudent".
12:51 – "We set out today the details of the welfare cap and will seek support of parliament next week," he adds. Only state pension and cyclical unemployment benefits are excluded. "Britain should always be proud of having a welfare system for those most in need but never again should we allow its costs to spiral out of control."
12:53 – "The rich are making the biggest contribution to the reduction of the deficit because we are all in this together," Osborne says. Outraged shouts from the Labour benches. The deputy Speaker intervenes. Income inequality is at its lowest level for 28 years, Osborne says. He says companies are being prevented shifting profits offshore. The number of registered tax avoidance schemes has fallen by a half.
12:54 – HMRC budget for non tax compliance will be increased, debt recovery rates will be increased for those with sufficient earnings, compliance checks will be increased for migrants claiming benefits they're not entitled to and there will be an expansion of a tax on people owning homes through a company. Quite the raft of measures. Anyone purchasing residential property worth over half a million quid through a corporate envelope will stamp duty whacked on them. "This abuse will end, " he warns.
12:56 – The libor fines will continue to go to military charities. The support will be extended to search and rescue and lifeboat services, as well as scout guides and cadets. Inheritance tax will be waived for those in emergency services who "give their lives".
12:58 – Osborne fits in another Labour joke, saying King John's defeat before the Magna Carta seems distant – " a weak leader" who attacked his older brother etc etc. Tories are enjoying it.
13:00 – Exports: Export finance rules are changing. Lending available will be doubled to £3 million and the interest rates charged cut by a third. Air passenger duty will be reformed. All long haul flights will have the lower tax rate as for the US. Private jets will pay, finally. Start up support will be offered for new routes from regional airports. "I want the message to go out that we are backing our exporters"
13:02 – Help to Buy will be extended to the end of the decade. In the South East new homes will be built in certain areas. We knew all this.
13:04 – He's approved a £270m guarantee for the Mersey Gateway bridge.
13:05 – £140m for repairs to flood defences. This is all a bit greatest-hits at the moment: house building, welfare reform, that sort of thing. Most of it we knew already or strongly expected.
13:07 – An Alan Turing Institute will be set up to dedicate itself to algorithm research. "We will out-think the rest of the world," Osborne says.
13:09 – He promises to lower energy costs and announces a host of measures, including a £7 billion package to cut energy bills for British manufacturers. The carbon price support rate will be cut from 2017 for the next three years. His voice, by the way, is failing fast. As it does so it gets higher and higher pitched. It is now quite strange.
13:14 – Osborne makes the childcare announcement and couples it with the earl years pupil premium. There will be no fuel duty rise.
13:15 – Duty will rise to 25% on fixed odds betting terminals. Here comes BINGO: Bingo duty is at 20%. Halfon gets a mention on this, as he has almost every Budget. He wanted it cut to 15%. It will be cut to 10%.
13:16 – The escalator for alcohol duty is being scraped. He really is struggling now to get through a sentence, and desperately tries to clear his throat between the words. The beer industry wanted a freeze in duty – they're going to get another 1p off the pint.
13:18 – The tax free personal allowance rises to £10,500 next year.
13:19 – There's a slight increase in top income tax bracket – a fiddle but it could be sold as a stemming of the tide.
13:20 – Ok, we're on savers. I think the big news is coming now.
13:21 – The simplicity and ease of ISAs will improve. ISAs will be merged with cash and stocks prices to produce a single new ISA. It'll be more flexible because they can transferred from one to the other. The annual limit will increase to £15,000.
13:22 – A pensioner bond will offer market leading rates in interest. The prices will be better than anything on offer on market today. This is to make up for the pensioners who lost out by low interest rates, and by no coincidence it targets a group that turns up voting day and often does so to vote for the Tories. The tax treatment of defined contribution pensions will be changed. 13 million have these schemes. People usually have to take out annuity rates, even though they fall by half. He's cutting income requirement for flexible draw down, the cap draw down limit will be cut too, the lump sum small pot will be increased and pension savings you can take as a lump sum will also increase.
13:25 – All remaining restrictions on pension pots will be removed – no caps, no draw down limits. This is "trusting the people", Osborne says. Everyone who signs up will get free impartial face to face advice. Anyone who still wants an annuity will get the chance to shop around. A quarter of your pension pot will be available on retirement, tax free. But anything else will be taxed at normal marginal tax rates at income. In the next 15 years, as people use these premiums, this will lead to an increase on tax receipts, Osborne assures MPs. These changes will require a separate act of parliament. "This is the most far reaching reform to the taxation of pensions since the regime was introduced in 1921."
13:27 – The 10p rate for savers will be abolished . "You've earned it, you've saved it and this government is on your side."
13:29 – Osborne rounding up now. "This is a Budget for the makers the doers and the savers and I commend it to the House."
13:30 – Ok, Labour will make its response now.
13:31 – Miliband is up. A wall of hateful noise. "The chancellor spoke for nearly an hour, but he did not mention one central fact: the working people of Britain are worse off under the Tories. Living standards down, month after month, year after year. "
13:33 – The deputy Speaker has interrupted twice now. In 2010, the Tory manifesto promised a rise in the standard of living, but "they've delivered exactly the opposite." Today Osborne reminded people of the gap between his rhetoric and the realities of their lives. "No amount of smoke and mirrors can hide it. Millions will be asking in 2015 are they better off now than five years ago. The answer is no – worse off, much worse off, worse off under the Tories."
13:34 – The chancellor painted a picture millions simply will not recognise, Miliband says. He lists food banks and the bedroom tax, an increase in those paying 40p tax. "But there is one group who is better off: the chancellor's chums, the prime minister's friends. The prime minister rolls his eyes. He doesn't want to talk about the millionaires tax cut."
13:36 – He waxes lyrical on the tax cut for some time. "These are the people who have the nerve to tell us we're all in this together. It's same old Tories. And of course the leader of the Liberal Democrats with them day after day. He claims he doesn't support Tory policy but day after day he votes for Tory policy."
13:37 – Miliband avoids the difficulties he's faced with comparing growth forecasts for last year with this year by comparing them to Osborne's aims in 2010, which they are still significantly lower than. Pretty much everything he says – manufacturing output etc – is based on 2010 forecasts. "At the heart of the argument is this question: Whose recovery is it?" And there's Miliband's election mantra right there.
13:39 – Another intervention by the deputy Speaker. "It's an economy by the privileged, for the privileged. They tell people their wages are rising when they're falling. You can change the shape of the pound but it doesn't matter if its square or oval. You're still worse off."
13:41 – It's all very vague. Fair enough – Miliband's been scribbling away during the Budget but there's only so much you can do when presented with it right then and there. But while the rhetoric is passable and focus-group approved, it is not exactly a forensic examination of the package. For a fourth time, the deputy Speaker intervenes.
13:42 – He asks whether Osborne will rule out a further tax cut of the top rate to 40p. "Just nod your head if you'll rule it out. Or perhaps the prime minister?" No luck, obviously. "All the prime minister needs to do is nod his head. Just nod your head. Come on. Come on. There you have it. They won't rule it out. They really do believe the way to make the rich work harder is to make them richer and the way to make the poor work harder is to make them poorer."
13:45 – Once again, the deputy Speaker intervenes so there is quiet for Miliband. He's facing a losing battle. Miliband is quoting Michael Gove's comments on Etonian dominance. "Where is the education secretary?" Miliband asks. "I think he's been banished. Ah, he's hiding. He's been consigned to the naughty step by the prime ministr. I think it's time we listened to Baroness Warsi and took the Eton Mess out of Downing Street."
13:47 – And with that he wraps up. Basically nothing there on the content of the Budget. it was relatively well delivered but really it did nothing to address anything that Osborne said. Quite what Miliband was scribbling I don't know – he could have written all that in advance.
13:48 – Andrew Tyrie, Tory, gets up to make the first response as chairman of the Treasury committee. And we will leave it there, so I can get myself some sharp objects and recreational narcotics. We'll have political analysis coming right up. See you next week when we're back to PMQs as per usual.