The Great Debate UK
A central pillar of George Osborne’s 2014 budget was the announcement that pensioners will no longer have to buy an annuity upon retirement and that they would have more control of their pensions pots, including the freedom to withdraw cash without incurring penalty tax changes.
This is a true blue move that has Conservative values right at its heart – giving retirees the right to do what they want with their money. While in most instances being freed from the shackles of government is something to be celebrated, in this instance a little government paternalism can be a good thing.
On paper it’s easy to see why the government has stopped forcing people to buy annuities – their dismal pay-outs in an era of record low interest rates were a major bugbear for today’s retirees (and next year’s voters in the general election). Indeed, some annuities come with so many punitive conditions and get-out clauses that you would have been better burning your money rather than buying one in recent years.
However, at heart an annuity in retirement is not a bad idea, especially in an era when firms can no longer afford to fund defined benefit pension schemes. Rather than cold shoulder the annuity the way that Osborne did, he should have worked with the pensions industry to make annuities a more reliable product for the UK’s large cohort of retirees. Osborne could be accused of dealing with this problem far too late into this government; after all if interest rates start to rise from next year, as expected, then annuities could become more attractive.
Confidence up. Inflation down. Exports up. Unemployment down. Growth forecasts up. With this backdrop it must have been difficult for George Osborne to draw up his fifth Budget. But what we have ended up with is a Budget for blue rinsers rather than businesses. He obviously thinks that everything is heading in the right direction with the economy and exports so there is no need to do much, despite all the supportive rhetoric around helping businesses.
George Osborne had good news to tell in his 2014 budget. The deficit continues to fall. Forecasts for 2014 growth, at 2.7% , are better than expected. Employment levels are now on a par with the US (he did not add that they lag behind Australia or Canada). The challenge he has set for this country is to increase exports to one trillion pounds by the end of the decade. That means the UK must increase its exports each year by 10.4 per cent.
–Cathy Corrie is a researcher at the independent think tank Reform. The opinions expressed are her own.– Today’s budget was a good news story. There is now no major advanced economy growing faster than the UK. Yet underneath the chancellor’s celebration, the end of austerity is nowhere in sight. With national debt heading inexorably up to over 75% of GDP, in the words of the chancellor: “The job is far from done.”The chancellor today made reference to two strategies to secure the public finances for the long term; the first, an Annual Managed Expenditure (AME) cap to limit welfare spending, and the second, a new Charter for Budget Responsibility, to be announced in full this autumn. Through these new measures Osborne has pledged to “fix the roof when the sun is shining to protect against future storms”, by returning to absolute surplus in the years of growth. The goal is to allow the UK to enter recessions from a position of financial strength, not on the back foot.Yet while the chancellor should be applauded for keeping fiscal discipline at the top of the agenda, history shows he faces a daunting challenge to deliver on his promise. For twenty years, governments have allowed debt to build by consistently spending more in recessions than they save in periods of growth. Debt has been left £124 billion higher as a result. It’s worth noting that 22 out of the last 26 forecasts have promised a return to surplus. No government since 2002 has thus far delivered.
–Dr Richard Wellings is Deputy Editorial Director at the Institute of Economic Affairs. The opinions expressed are his own.–
History is unlikely to be kind to George Osborne. Four years after he became chancellor, the national debt has exploded, the budget deficit remains at dangerously high levels, and an increasing share of tax revenues must be devoted to repaying creditors.
–Tanuja Randery is the CEO of trading services firm MarketPrizm. The opinions expressed are her own.—
As the economic downturn continues to drag on, the cynics amongst us might be forgiven for thinking that the “Tobin Tax” is a move by politicians to curry public favour by taking punitive measures against the financial services sector.
It was bound to happen. You could see it waddling into view from a long way off. We are now being told by the medics that we should seriously consider a tax on fatty foods, in order to combat the scourge of obesity. How appropriate that, according to The Independent, the Deputy PM is planning to recruit 65,000 “State Nannies”!
One wonders how the new tax will be computed. Will it be a higher rate of tax on higher fat-content foods? Will chicken breast be taxed at a lower rate than chicken legs? Will omega-3 fats be taxed at a lower rate than omega-6? Either way, we can look forward to a tabloid feeding frenzy which will make pastygate look like a Cornish picnic.
By Joe White
Delivering his second budget speech yesterday, Chancellor George Osborne revealed that he is leaving in place all of the austerity measures which will have a direct impact on the public sector. Meanwhile, there was a lot of policy aimed at supporting business and the private sector. The implicit assumption is that the private sector will take up the slack and continue to drive growth. This is the gamble, and we will have to wait and see if it works.
The government’s predictions for growth are down, and the reliance on the OBR forecasts could come back to haunt George if it starts to get worse and they continue to further revise down their independent estimates. Growth is the ultimate balancing factor for the public finances, so it is all important.
The second budget presented to Parliament by Chancellor George Osborne is likely to be less talking and more doing when it comes to bringing the UK’s public finances under control.
This won’t be to everyone’s tastes. Some argue that the UK is in less financial danger than Europe’s financially troubled states, yet Osborne is embracing deficit reduction plans with as much gusto as Ireland or Greece.
By Thomas Story, Tax Director, BDO LLP. The opinions expressed are his own.
George Osborne has promised that measures to boost sustainable growth will be central to this week’s Budget. To meet this objective, the Chancellor faces the challenge of accelerating the reform of business taxation within the severe constraints imposed by the overall fiscal position and the political imperatives of the coalition government.
Many previous reforming Chancellors have benefited from a more benign fiscal outlook to facilitate fundamental fiscal reform (Nigel Lawson and Gordon Brown spring to mind). The daunting fiscal deficit means that any tax reforms must be achieved within a tax neutral framework; Geoffrey Howe’s Budgets in the early 1980s are a closer precedent but the need to accommodate both parties to the coalition agreement provides additional dilemmas in 2011.