Budget 2015 – This Is For The Savers

So there it is then, the last budget before a General Election which is still very close to call. This was always going to be a budget that was more political in tone than anything else, with Chancellor George attempting to use the occasion to put some real distance between the Tories and Labour.

As in the past we saw the usual pre-budget leaks and predictions as well as more speculation on white rabbits and big hats.

The Chancellor was at pains to point out that this budget would contain “no gimmicks” beforehand, but there were certainly some crowd pleasers.

Whilst the cuts in alcohol and freezing of petrol rises will be welcome, the Chancellor was at pains to reach out to the whole country, especially the North, with some pretty bold declarations and the promise of a “Northern Powerhouse”. More jobs were apparently created in the “Great county of Yorkshire” than the whole of France!

In fact, unemployment was set to fall to 5.3% this year, with 80% of these jobs being full-time and many outside London and the South-East.

There was lots of rousing stuff about OBR figures confirming that at 2.6% Britain grew 50% faster than Germany, 3 times faster than the Eurozone and 7 times faster than poor France. As a result GDP growth was revised up at 2.5% this year, 2.3% until 2018 then 2.4% in 2019.

There was a mention of locking in historically low interest rates for the long term, ending austerity a year earlier than planned in 2019 and many references to fixing the roof whilst the sun was shining!

The other side of the House remained un-convinced however.

Tax wise, the Personal tax allowance was raised to £10,800 in 2015/16 then £11,000, whilst the Higher rate tax level will be raised to £43,300.

For small businesses there was some welcome news as Corporation taxes were cut to 20% whilst for the self-employed Class 2 national insurance contributions will be abolished in the next parliament. Annual paper tax returns were also abolished which will spread some joy amongst those of us who like to leave things to the very last minute!

The real rabbit out of the hat stuff was reserved for savers, who have suffered with low savings rates for the past few years. The new Personal Savings Allowance means that the first £1,000 interest on savings will now be tax free will help, as will a new “Fully Flexible” ISA which means savers can withdraw their money and then pay it back later in the year without losing the tax-free status.

It was also welcome to see pensioners now given access to their annuities and able to take out this money when they need it at their normal rates of tax.

The big surprise was the Help To Buy ISA. On the face of it anything that helps 1^st Time Buyers crack the deposit gap that many are struggling with should be welcomed and it is certainly a well-intentioned move.

In terms of details on the ISA itself there are several key points :-

1. New Accounts available for 4 years, but once opened no limit on how long you save for
2. Initial deposit of up to £1,000 can be made, then up to £200 per month
3. The Government will top up 25% of the savings made up to £3,000
4. These are per person not per household so those buying together can both get a bonus
5. Bonus available only to 1^st Time Buyers buying any UK property
6. Bonus available on properties up to £450,000 in London and up to £250,000 outside of London

In other words, if you save £12,000 the Government will boost this to £15,000.

Of course there will undoubtedly be questions however, as to whether or not this additional bonus will really eat into the cost of buying a property, or simply help to keep house prices at a higher level.

Either way, the key is that this encourages people to save and goes some way to also deal with the low saving rates on offer. Overall, it is a pretty innovative idea and one that should be welcomed.

Perhaps the whole thing could be summarised as “this one’s for the savers, the beer drinkers and the North”.

Whether the Chancellor has done enough to convince voters remains to be seen, but to be fair, it was a pretty well delivered budget, with some lyrical dexterity that sounded almost like a joyful rap in parts, especially with some decent, though predictable gags, about brotherhood and two kitchens at the oppositions expense.

Maybe the real question should be, does the opposition have anything of any value to offer? We will know soon enough.

Let the election battle commence!

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