On 16th March 2016, the Chancellor of the Exchequer, George Osborne, delivered his third Budget within the last 12 months in which he announced that “we choose to put the next generation first.”
The Statement was made against the backdrop of sobering news from the Office of Budget Responsibility (OBR). UK growth forecasts have been revised down significantly and public sector net debt as a percentage of GDP is set to rise next year. This means that the Chancellor has broken his pledge that the debt to GDP ratio would fall every year. Despite this, however, Osborne reaffirmed his commitment to running a budget surplus by 2019-20, announcing £3.5 billion of additional spending cuts to achieve that target. Osborne stressed his commitment for the UK to live within its means will maintain long term stability amid challenging times for the global economy. He also argued that by acting now, the government will ensure “we don’t pay later” and thereby “put the next generation first.”
Aside from his fiscal policy, the Chancellor spoke of lasting structural reforms for the UK’s economy. This included reforms to the business tax system (lower corporation tax and rates), support for the oil and gas industry, commitments to new national infrastructure projects, further devolution deals for UK regions, new measures to help young savers and education reforms to ensure that every primary and secondary school in England will become an academy. Osborne also announced that Capital Gains Tax will be cut and the raising of thresholds for tax free personal allowances and higher rate tax level. Of all his taxation measures, however, perhaps his most eye-catching was his decision to introduce a new sugar duty on soft drinks, which seemed to be a genuine surprise for many observers and likely to dominate the post-Budget headlines.
Despite these announcements, this Budget could be considered quite a risk-averse and low key affair. Osborne is likely to have considered that he had little room for manoeuvre in the context of a slowing global economy and a volatile political atmosphere dominated by the upcoming EU Referendum. Indeed, many of the measures taken could be viewed in the context of soothing his own Conservative backbenchers, with many provocative decisions consciously avoided (eg a fuel duty rise, or further details on cuts) to prevent further political tensions escalating ahead of June.
The prospect of Brexit cast a significant shadow over large portions of Osborne’s Statement and even warranting him making an explicit mention of the economic risks of leaving the EU, as identified by the OBR. It is easy to see why he did this. If there Referendum does not go his way, this could prove to be the last Budget speech Osborne makes as Chancellor.