That's all for the live blog today. Visit our Budget page for the
latest news on the Budget
2011 and how
the Budget might affect you.
In the markets, the FTSE 100 closed up 1.5pc, while the pound dropped 1pc
against the dollar and the cost of borrowing rose.
We leave you with a bit of advice from Harry Wallop, The Telegraph's
Consumer Affairs Editor. He warns savers they will have to act quickly if
they want to take advantage of the inflation-beating savings bonds that were
announced as part of the Budget. As few as 67,000 people could be able to
buy them.
Mark Dampier, head of research at financial adviser Hargreaves Lansdown: "I
think they will sell out within weeks. There will be plenty of people,
coming up to retirement, who have paid off their mortgage with money to
invest, who would jump at these. If you hang around you will miss out"
16.15 IFS analyst Gemma Tetlow says fast-rising
prices means spending would need to increase by more than planned to
result in the same effective cut, and as the Chancellor is not topping up
departmental spending limits, ministers may have to find extra savings as
their costs rise.The Government might therefore struggle to meet its pledge
to raise real terms spending on the National Health Service in every year of
the current Parliament.
Here the link to the IFS
Budget 2011 analysis and presentations.
16.00 The focus has continued to move from the Budget and Britain's
slowing economy to Portugal's debt crisis. David Cameron is among
European leaders meeting in Brussels to discuss the country's finances. He
said it was important to get "get Europe working".
Angel Gurria, the secretary-general of the Organisation for Economic
Co-operation and Development, said Portugal is "a rocky few weeks".
15.30 The British oil industry continued to reel from the Treasury's
shock windfall tax to pay for a cut in fuel duty for drivers. George Yule,
chairman of Aberdeenshire-based Romar International, told the BBC the
levy would hit confidence in the North Sea. A radical sell-off in
independent producers continued today. Enquest is now down over 13pc in two
days.
Giving evidence to the Treasury Select Committee, Jonathan Portes of the
National Institute of Economic and Social Research said the fair fuel
stabiliser was "seriously flawed".
The fair fuel stabiliser is also likely to be damaging. It will make the
necessary adjustment to higher oil prices - and in the long term, a low
carbon economy - slower and more expensive. Even worse, it will have the
dual impact of reducing domestic oil production, while increasing
consumption
Even motorist
are angry, complaining that prices have not fallen yet on their
local forecourts. It may not matter as oil prices rose closer to $116 a
barrel this afternoon as western attacks on Libya continued - the
French shot down a Libyan plane - and unrest spread in the Middle
East.
15.21 Philip Aldrick, our Economics Editor, gives his summary of
the IFS analysis of the Chancellor's second Budget:
According to the Institute for Fiscal Studies, the Budget shows that the
spending cuts have risen by £4bn in real terms over the next four years. The
increase has been caused by a higher level of inflation than previously
forecast, which means spending would need to rise by more than planned to
result in the same effective cut. As the Chancellor is not topping up
departmental spending limits, ministers may have to find extra savings as
their costs rise.
Why hasn't the Chancellor increased spending in line with inflation? One
reason the IFS gives is that he has less headroom to meet his central pledge
to have eliminated the structural deficit within five years. In fact, the
IFS added, there is a 30pc chance that he may have to top up consolidation.
The austerity drive, remember, is £30bn of tax rises and £80bn of spending
cuts over the five years from 2010.
15.11 An amusing observation from Helen Miller, research economist at
the Institute:
Osborne promised fuel in the tank but there was little in the Budget to
help miles per gallon.
15.05 Jeremy Warner, the Telegraph columnist, tweets:
@telegraphwarner #IFS
says real terms 0.9pc cut in NHS spending by 14/15. Has gov broken its
pledge on health spending?
14.47 Institute of Fiscal Studies says that Inflation will make the
Coalition's cuts feel even worse. At a briefing that has just finished the
independent group said that the Chancellor would have had to spend an extra
£4bn to off-set the impact of inflation - or put another way, as the
Stephanie Flanders is telling the BBC, it will feel like extra £4bn of cuts.
The BBC's economics editor added that the IFS numbers show that real spending
on NHS is rather less than the Government suggested.
1430 Vince Cable is defending the Budget in the Commons debate
on the Budget. He warns there's tough balance between not choking of
recovery and not risking a financial crisis.
1350 It's Ed Balls vs Vince Cable on the Budget 2011 in
the House of Commons. The shadow Chancellor warns the economy is "entering
the danger zone again" and claims that under "Labour's plans the
economy was set to grow strongly...everything has changed. What changed was
the arrival of a Conservative Chancellor with a plan to implement the
largest spending cuts of anywhere in the world.... His policy is going too
far and too fast."
Tory MP Jesse Norman intervene's to ask why WPP left Britain under the last
Government and said it has plans to return today. Ed Balls says he's pleased
that WPP has come back and sorry about the loss of jobs with the closure of
Pfizer's plant in Kent.
13:42 The Telegraph's Louisa Peacock says employment experts are
already questionnning whether the extra £180m apprenticeship funding is
enough to tackle the scale of youth unemployment.
Barry Hoffman, the human resources chief at Computacenter:
The merger of income tax and NICs is not before time and it will be
interesting to see what the consultation period unearths. Perhaps the saving
could go to boost some of the other measures announced, such as paltry £300m
earmarked for training and work experience for the young unemployed.
13.27 Accountants are picking holes in the Chancellor's Budget figures.
UHY Hacker Young has warned that the Treasury's
plans to raise £3.7bn from a crackdown on tax avoidance - from
the likes of footballers and hedge fund managers - is deeply flawed.
Richard Lloyd-Warne partner of UHY Hacker Young:
It is relatively easy to close a loophole but what most tax planners expect
is that new schemes will be used to find similar tax savings for high
earners.
For high earners there is so much potential tax at stake that they are
prepared to spend whatever is necessary on legal advice to find the next big
legal tax saving scheme.
However he reckons the subtle shift of inflation calculators might result in
the Chancellor collecting an extra £2bn from the rest of us. He says:
This year by switching from the use of RPI to CPI in some tax bands George
has put in place a mechanism to collect an extra £2bn in taxes over the next
five years. For each individual taxpayer that change in the tax bands will
be largely unnoticed.
13.13 Mark Hoban has played down fears over Portugal. The Treasury
Minister has said that Britan's exposure to Portugal is small and that it
will play no part in a proposed permanent European bail-out fund because it
is not in the euro zone.
He has told the House of Commons:
A number of countries have strong views about how the ESM [European
Stability Mechanism] should be designed including Germany but this cannot
change the fundamental aspects of the mechanism. That is because the ESM was
developed and ... can only apply to member states whose currency is the
euro. So the UK cannot join the ESM without joining the euro...this will not
happen in the lifetime of this parliament.
Bilateral trade in 2010 was about £4bn so there isn't a significant
exposure there but it is of course an important trading partner.
12.48 The Telegraph's James Quinn has spotted that Osborne is
set to cut out an ol' favourite as part of his tax simplification effort.
One the 43 tax reliefs Osborne has promised to abolish concerns luncheon
vouchers, the 70's and 80's favourite. Although the old 'LV' sign has long
since disappeared from many a Square Mile eatery, the fact that it was
enshrined in the HMRC tax code was a throw-back to yesteryear. Another part
of City history has gone for good.
12.20 Lord Sugar has just posted his House of Lords speech on his
Facebook page. This morning he promised the Government a tough time,
but instead he seems to be defending the banks - and giving small business
owner's both barrels. The no-nonsense business-turned-media star has told
the Lords:
The current government is constantly bleating that the banks aren’t being
helpful in lending money to small businesses – whereas the message to the
small business community should be one of realism: understanding that no-one
is going to lend money to a lost cause.
In my recent seminars I’ve received comments from some people along the
lines of, “The bank has been outrageous; they’ve actually asked me to put up
some collateral – my house for example!" Well, I'm very sorry,
but why not? Why should they take a risk on you if you're not prepared to
take a risk on yourself.
And Vince Cable, who makes much of his former role as chief economist
at Shell, won't be too chuffed about this:
I remind people: “Who is there in government to be able to dish out such
advice? Just step back and look at them. Take, with the greatest of respect,
the current Business Secretary. He's never been in business! He’s never run
a business! He’s been an advisor or a politician all his life. He has never
touched the coal face. I mean, frankly, what does he know?
Lord Sugar ended with some advice for the Coalition.....
All government can do is to provide a good business environment, assistance
from HMRC, for example, Export Credit Guarantee if you are successful enough
to find export customers; tax breaks for entrepreneurs who sell their
businesses, and tax deductions for investment in R&D.
...and for those small businesses:
In taking advantage of all these wonderful tax incentives announced in
yesterday’s budget, might I just bring everybody down to earth again and
say, 'To benefit from them, you have to make a profit.'
12.04 Interesting observation on the OBR forecast's by Stephanie
Flanders, the BBC's economics editor. She tweets:
@BBCStephanie
"Interesting OBR nugget: in testing their figs vs different scenarios
they are banned from considering implications of slower deficit cuts."
@BBCStephanie "Makes
it impossible to judge the growth impact of government's deficit plan
because you need to see an alternative with looser policy."
12.00 The Telegraph's Emma Rowley is back from a joint briefing
between TaxPayers’ Alliance and Institute of Economic Affairs. She reports:
"Matthew Sinclair, director of the TaxPayer's Alliance said the
Chancellor’s decision to raise North Sea oil taxes could have serious
consequences. He said higher taxes are likely to mean investment is diverted
to other parts of the world, at the UK’s expense. In the end, substantial
reserves – with a substantial value – could be left in the ground,
increasing Britain’s dependence on foreign oil and gas at a time when
significant geopolitical instability makes domestic production particularly
valuable.”
1150 In the meantime Cameron and Clegg are continuing their post-match
tour. The pair are set to announce the first of a new wave of 21 enterprise
zones – a revival of former Thatcherite policy that will offer businesses
tax breaks and lighter planning restrictions.
The Belfast
Telegraph has reported that Francis Martin, of the Chambers
of Commerce, said that Northern Ireland should be classified as an
enterprise zone in order to help stimulate job creation and grow the private
sector.
Our view is a region-specific reduction in corporation tax can be a major
step in rebalancing the Northern Ireland economy and we welcome the
commitment to engage local ministers on this issue.
The UK-wide 2% reduction in corporation tax does not address the unique
situation in Northern Ireland," he added. "The fact that we have a
land border with the Republic with their lower tax rate puts Northern
Ireland at a significant disadvantage when it comes to securing direct
investment.
11.37 The House of Commons is debating the financial situation in
Portugal amid estimates that a E60m bail-out could be needed. The UK will be
liable for some of it.
Cameron is set to travel to Brussels later today for a pre-arranged European
summit of sovereign debt crises, including bail-out mechanisms. However,
officials are warning that there's unlikely to be any firm resolutions while
the situation in Portugal is so volatile.
11.29 More grim news for Osborne as Moody's warns that Britain's
AAA sovereign debt rating could be at risk in the wake of yesterday's
disappointing growth figures.
The rating agency has backed the Chancellor's efforts to reduce the deficit
saying it is "very important to the Aaa rating and stable outlook,"
but has added:
"Although the weaker economic growth prospects in 2011 and 2012 do not
directly cast doubt on the UK's sovereign rating level, we believe that
slower growth combined with weaker-than-expected fiscal consolidation could
cause the UK's debt metrics to deteriorate to a point that would be
inconsistent with a AAA rating."
Moody's has downgraded its own forecast for British growth this year to 1.6pc
from 2.0pc, below the 1.7pc forecast yesterday by the Office of Budget
Responsibility.
11.08 The debate continues about whether or not consumers will benefit
from Osborne's fuel duty cut. Motorists reports are pretty miserable -
plenty reckon petrol station pumped up prices yesterday morning ahead of
taking 1p off last night, while others insist there's been no change at all.
Meanwhile, the politics is pretty murky too.
Paul Waugh of Politics Home has blogged
about a Regulatory Impact Assessment that was carried out for
the Treasury in 2006 - the last time North Sea Oil was levied. He quotes:
Oil companies are price-takers, facing a globally-determined market price
for their output, and so will absorb all costs. They will be unable to pass
any costs on to consumers, and the impact will be distributed
proportionately across producers with no adverse effects on competition.
10.45 Still with the PM and DPM in Nottingham, Clegg says the levy on
oil companies is a "fair deal for all."
Onto the banks Clegg says his message hasn't changed: "If you mess up you
have to pick up the pieces" which includes keeping up the pressure on
bonuses and lending to businesses. Cameron adds that the banks had to be
bailed out to avoid "not just a recession but a full on depression."
10.37 David Cameron and Nick Clegg have taken to the road to explain
the Budget. At the moment they are in Nottingham "facing the public"
at a PM Direct event at Boots, the chemist. Cameron says Boots is exactly
the sort of company the Budget was supposed to encourage. Repeating that
Britain has been too concentrated on the City Cameron says businesses like
Boots have a "a very big role to play in the rebalanced economy."
Clegg adds that measures like corporation tax cut and more money to science
and research were all designed to help.
10.15 The business optimism Osborne sparked yesterday appears to be
being systematically hammered this morning. Blood on the high street is the
latest concern. The Office of National Statistics has reported that retail
sales dropped 0.8pc during February, more than expected.
David Kern, Chief Economist at the British Chambers of Commerce (BCC),
said:
These disappointing figures highlight the fragility of Britain’s economy.
The drop in retail sales for February is worse than expected and reinforces
our view that the OBR’s expectations for GDP growth of 0.8% this quarter is
too ambitious.
With the Government persevering with austerity measures, it is clear that
businesses and consumers will face many pressures in the months ahead. While
it is necessary for the UK to persist with tough fiscal policies as a means
of restoring stability to the public finances, the impacts of this must be
alleviated by an expansionary monetary policy with low interest rates.
Today’s figures reinforce our view that the MPC must act cautiously and not
rush into a premature increase in interest rates.
09.38 Lord Sugar is 64 today and he seems to be planning a surprise for
the Chancellor as a present to himself (in addition to a spell-check gadget,
no doubt.)
The Amstrad boss and Labour peer has tweeted: @Lord_Sugar
I am speaking in the house of Lords Today on the economy Mr Osborn [SIC]
will not be amused.
09.20 The Budget 2011 is trending on Twitter this morning as the
Chancellor's policies hit the streets.
Having said that, despite Osborne's assurances, there's disappointment from
tweeting motorists.
@Rob_Cummins
Money off petrol duty, but prices at the garage remain unchanged.
#budget #fail
The cut in corporation tax is getting mixed reviews too.
@Charlesm186
if you cut the 50p tax rate you generate more tax revenue - the
1980's proved this correct #budget
@adamjlent
Germany is a booming export led economy with corp tax of 30%. Why
will cutting UK corp tax to 23% lead us to the same place?
But the top tweet is still from @tumour
Osborne: "We're all in the same yacht."
09.00 European markets have turned tail and are now rising strongly.
Traders say that mixed reactions to events in Portugal, the Middle East and
the UK Budget is likely to cause continued volatility this morning.
08.35 Fears over Portugal are already hitting the markets as an
EU bail-out looks increasingly likely.
The FTSE 100 slipped in early trading as markets were wary after a rescue for
Portugal moved closer.
London's index of leading shares opened down 8.9 points - or 0.2pc - at
5804.8. In Europe, Germany's DAX dipped 0.1pc and France's CAC lost 0.2pc,
while Portugal's PSI 20 and Spain's Ibex both falling around 1pc.
Mike Lenhoff, chief strategist at Brewin Dolphin, said:
If Portugal is going to require some loans from the (EU) funding facility
the risk is that if there is some difficulty somewhere else the facility is
going to be exhausted.
08.30 Sir Martin Sorrell, the boss of WPP, has given Osborne a
welcome boost this morning by suggesting he's
prepared to move his headquarters back to the UK from Ireland.
The advertising boss moved WPP to Ireland over what it said was uncertainty
over the future of UK taxation policy. He has always maintained he would
return if corporate taxes were lowered.
This morning he said: "There has to be legislation enacted... (but) I
think it looks as though we will make that recommendation."
@paulwaugh Q: cd the fact that Ireland is tanking have *anything* to
do with WPP move back to London? Just askin'
08.15 Meanwhile, the Chancellor is on to the next problem: the
soverign crisis in Portugal after the resignation
of Jose Socrates last night.
The European situation is unstable as you can see with what is happening in
Portugal, and this is because of debts and deficits.
These are not two separate stories, Britain has a higher budget deficit,
more debts in that respect every year than countries like Portugal and yet
we manage to keep our interest rates right down to those closer to Germany's
because we have got a credible plan.
08.00 Ed Balls, the shadow Chancellor, has been on Radio 4 insisting
that the windfall tax on the oil companies will be passed onto morotorists.
He said:
Can George Osborne guarantee they won't just push that straight back up at
the pumps? No he cannot," "Can George Osborne guarantee they won't
just push that straight back up at the pumps? No he cannot. What he should
have done is cut VAT on petrol and he didn't.
Osborne has denied this, insisting that he will monitoring oil companies to
ensure they did not recoup the cost of higher taxes by pushing up retail
prices "We will watch like a hawk to make sure that motorists get the
benefit of the budget changes and make sure that there's no funny business,"
he told BBC Radio 5. He said:
We spent 2 billion pounds cutting fuel duty, and we know that because the oil
companies are complaining that I have taken £2bn out of them.
We've got an international oil market. The petrol that you put in your car
doesn't just come from the North Sea, it comes from the Middle East, Russia
and so on.
This idea that they're not going to be able to pass on this cut is a bit of
a myth being put around by the Labour party at the moment and I would
suggest to people to ignore it.
The newspapers this morning concentrate on Osborne's efforts to boost business
on one hand and his percieved refusal to "give away" to
individuals on the other.
07.45 The Telegraph's Business Editor, Alistair Osborne says
that while Osborne is "no
Harry Houdini, for a man in a fiscal straight-jacket, he's just about
wriggled himself free."
Almost everywhere you looked, the Chancellor’s hands – and feet – were
tied. He had been banking on 2.1 per cent growth this year but now had to
settle for 1.7 per cent – a legacy of the pre-Christmas snow that turned the
whole economy parky.
Given such constraints then, you have to hand it to Mr Osborne: he conjured
up a Budget that went further than simply making the best of a bad job. And
he did it in a way that signalled the principal difference between this
Government and the last lot. Whereas Mr Brown insisted he knew how to spend
our money better than we did, and built a bloated client state to prove it,
Mr Osborne has put business — and specifically private enterprise — at the
heart of Britain’s economic recovery.
07.40 Osborne's flagship policy - the 1p cut in fuel duty - dominates
most of the headlines. The Telegraph leads on Osborne's £2bn levy on North
Sea on and his claim that he's "putting
the fuel into the tank of the British economy."
There's help for motorists, tax cuts for millions but still "Shocks under
the bonnet", say the Daily
Mail. The paper notes Osborne's efforts to put himself "on the
side of middle earners" but warns that the "soaring cost of living"
and yesterday's poor economic figures will mean "millions working
longer and paying more tax."
The Independent's reckons it's a tall order Osborne bets on Growth: Let's
hope he's lucky
The Financial Times columnist Matthew Engel has concluded that Osborne's "every
word was a dart aimed a Brown's corpse." He's also done a very
funny sketch of "two men who were not allowed to speak" during
yesterday's speech:
One was the deputy prime minister who, as is now the norm, sat there with
the faraway look of a condemned defendant. It is not even a full year since
the time of Cleggmania, yet, in his own Sheffield constituency, even
nursery-age children now come home with Clegg jokes. (“Why did Nick Clegg
cross the road?” “Because he said he wouldn’t.”)
Across the floor, there was Ed Balls, the shadow chancellor. What a sight
he presented. Much of the time he grinned like a tricoteuse. At other times
he seemed to be taking his job description to an extreme and delivering his
own speech sotto voce. Then he would stop and sit beatifically like an
obsessive fan listening to his favourite comedian delivering predictable but
much-loved lines."
But for some paper's the writing is already on the wall: the Daily Mirror
reckons the Chancellor is Taking the P while The Daily Star has gone for a
heady mix of business and sport reporting England's footballer pay packages
under the headline: Balls to the Budget.
07.35 A quick re-cap on the Budget's
main points. And a more comprehensive
breakdown here.
And the Telegraph's handy guide to winners
and losers.
0733 George Osborne says Britain faced “a very tough situation”
but insisted he was right to take Britain out of the firing line of the bond
markets. “It is tough but it is the right course for the country. It is a
hard road, but it leads to a better future."
07.30 So it's the morning after the day before and, after the frenzied
first take, it's time for Budget Day 2: The Small Print. George Osborne's
intention was to refocus Britain's entire economy to focus on business and
enterprise. But, with the official growth forecast's down, has he done
enough? Stick with us for all the anaylsis and market reaction live.
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