The Chancellor of the Exchequer George Osborne holds his ministerial red box up to the media as he leaves 11 Downing Street on July 8, 2015 in London, England.Stuart C. Wilson/Getty Images
The U.K. will keep cutting the budget deficit at the pace set since 2010 as its economic recovery continues, Chancellor of the Exchequer George Osborne said as he unveiled the first all-Conservative budget in almost two decades.
He set limits on tax relief for so-called non-domiciled people living in Britain, stopping the arrangement that allows them to reduce their liabilities from being permanent and disallowing people from inheriting the right. The chancellor also announce a reduction in the bank levy and a new surcharge on bank profits.
The British economy will grow 2.4 per cent this year and 2.3 per cent in 2016, according to estimates by the Office for Budget Responsibility, compared with March forecasts of 2.5 per cent this year and 2.3 per cent next year.
"The British economy I report on today is fundamentally stronger than it was five years ago," Osborne told lawmakers in the House of Commons in London on Wednesday as he announced his seventh budget since becoming chancellor in 2010. "Having come this far, there can be no turning back."
The deficit will be 69.5 billion pounds ($107-billion U.S.) this year, compared with the 75.3 billion pounds predicted in March, Osborne said, citing OBR estimates. Borrowing will then fall to 43.1 billion pounds in 2016-17, 24.3 billion pounds in 2017-18 and 6.4 billion pounds in 2018-19. The U.K. will be in surplus in 2019-20, a year later than forecast in March.
No Constraints
It is the first time Osborne has been able to set out his plans for tax and spending without being constrained by the Liberal Democrats, who lost their share of power after the Conservatives won a surprise parliamentary majority in May's election.
"This is a budget that can only be delivered because the British people trusted us to finish the job," he told lawmakers. "We should aim for a new settlement across the political spectrum where it is accepted that without sound public finances there is no economic security for working people, that those who suffer when governments run unsustainable deficits are not the richest but the poorest and therefore in normal economic times governments should run an overall budget surplus."
The levy on banks will be "gradually" reduced over the next six years, Osborne said, and won't apply to worldwide balance sheets after that. There will be an 8 per cent surcharge on bank profits starting in January 2016, he said.
Inheritance Tax
Even before the budget, Osborne said he would press ahead with plans to cut taxes on inheritance and reduce welfare for the poor. The Liberal Democrats wanted less welfare cutting and higher taxes on the rich.
Osborne's aim is to turn a budget deficit of almost 5 per cent of gross domestic product into a surplus by slashing 25 billion pounds from welfare and government departments in an intensification of the austerity drive he began in 2010.
Osborne has said he'll raise the threshold for paying inheritance tax to 1 million pounds in 2017, funding the move by restricting pension tax relief for people earning more than 150,000 pounds a year.