Chancellor George Osborne’s summer budget saw workers and businesses get a boost. But austerity was still a top priority. MILES O’LEARY finds out more.
Budget at a glance
- Government to spend two per cent of GDP on defence every year, meeting Nato target. New £1.5bn Joint Security Fund to be created
- Student maintenance grants to be replaced with loans from 2016-17, which are to be paid back once people earn more than £21,000 a year
- Introduction of a new national living wage for all workers aged over 25, starting at £7.20 an hour from April 2016 and set to reach £9 by 2020
- Corporation tax to be cut to 19 per cent in 2017 and 18 per cent in 2020
- NHS to receive a further £8bn by 2020
- New apprenticeship levy for large employers
- No rise in fuel duty with rates continuing to be frozen
- Deficit to be cut at same pace as last Parliament - securing a budget surplus in 2019-20
- Tax credits and universal credit to be restricted to two children, affecting those born after April 2017
- Income threshold for tax credits to be reduced from £6,420 to £3,850
- Working-age benefits to be frozen for four years - including tax credits and local housing allowance
- Personal allowance, at which people start paying tax, to rise to £11,000
- The point at which people start paying income tax at 40p to rise from £42,385 to £43,000
CITY leaders have welcomed a commitment to increase defence spending.
The chancellor revealed the government would put two per cent of national income into the military budget every year over the next decade.
A pledge was made to raise the Ministry of Defence’s budget by 0.5 per cent.
The announcement ends months of speculation over the future of defence spending.
Ministers had previously ruled out committing the UK to meeting the two per cent level beyond the current financial year.
It follows a promise made by defence secretary Michael Fallon that naval spending would be protected.
Portsmouth North MP and armed forces minister Penny Mordaunt said it was a huge boost for the city.
She said: ‘It means we are able to invest what we need into our armed forces. It provides stability and planning for them.’
Portsmouth South MP Flick Drummond said: ‘It’s welcome news for the Royal Navy in Portsmouth and the armed forces in general.
‘As the economy grows, this amount will grow too and it is much needed to keep this country safe as the terrorist threat grows week by week.’
In its budget policy document, the government says it remains committed to maintaining the size of the army at 82,000.
And a joint security fund of £1.5bn year will be created by the end of the parliament to pay for increased spending on the military and intelligence agencies.
The Chancellor also disclosed that the budget for the overall counter-terrorism effort - a total of more than £2bn spent by a range of departments, agencies and the police, will be protected.
But Portsmouth Lib Dem leader Gerald Vernon-Jackson remained sceptical.
And he wants to see the government use money to replace all 13 of the Royal Navy’s Type 23 frigates.
He said: ‘We do not yet know if this is just changes in accounting regimes or if this is real money.
‘We need to see the details of it.’
Mixed feelings over living wage proposals
A NEW compulsory ‘living wage’ of £9 an hour is to be rolled out by the end of the decade.
George Osborne declared Britain deserved ‘a pay rise’ as he unveiled the move, which will replace the national hourly minimum wage of £6.50 for everyone aged 25 and over.
The wage will ensure they receive £7.20 an hour from next April, with the figure rising to £9 by 2020.
But sceptics criticised the government for sidelining under-25s as they won’t be entitled to the enhanced pay.
Jon Woods, of Portsmouth Against Cuts Together, said: ‘It’s disgusting. We have seen the budget attack young people. They are cutting the budget for people under 21, cutting the maintenance grant for people going to university – this is disgusting of the Tories.
‘Waiting until 2020 is too late. The government should be applying the living wage as of now.
‘It’s no good waiting for five years.’
But Meon Valley Tory MP George Hollingbery defended the decision.
He said: ‘This is just the best news for lower earners and an important milestone for Britain becoming a higher-wage, lower-tax, lower-welfare country.
‘It will also be a country that is balancing its books by the end of this parliament.’
Havant Tory MP Alan Mak said: ‘The new national living wage, combined with income tax cuts, are excellent news for hardworking people in Havant, and shows we will deliver what we promised.’
Rhys Moore, director of the Living Wage Foundation said: ‘This is a massive victory for Citizens UK and those communities, workers and business leaders who have campaigned for a Living Wage since 2001.’
The foundation also called on employers to become voluntary Living Wage employers to ensure young people didn’t miss out.
PLANS to introduce an apprenticeship levy on large firms to encourage them to take on apprentices has been welcomed.
But those that already run schemes, or those which introduce them, will receive cash from the levy to put towards apprenticeship training.
Ian Luckett, co-director of Lucketts Travel Group, welcomed the move.
He said: ‘We are committed to the training of young people and we feel it is essential that the government and large companies address bridging the skills gap and help give people who might not be interested in pursuing further or higher education training a way to learn the skills and engage with businesses which will give them a long and well-paid career.’
Tim Walker, managing director of Taylor Made Solutions, in Fareham, said: ‘The new levy on large firms to encourage apprenticeships sounds good in theory and along with the changes to welfare, will hopefully encourage young people into the world of work.
‘I would have liked to have seen more for entrepreneurs and start-ups, although the government has previously made steps forward in these areas.’
The move is likely to affect firms employing 250 people or more.
THE chancellor wielded the axe on welfare, ruling only the first two children will be eligible for tax credits.
The income threshold for accessing tax credits and universal credit is being raised.
Working-age benefits - including tax credits and local housing allowance, but not maternity pay and disability benefits - will be frozen for four years.
And the system of grants for students from poorer backgrounds is being scrapped in favour of loans to save £1.6bn.
Portsmouth’s deputy Labour group leader, Cllr Aiden Gray, said families on the ‘bottom rung’ of the ladder will be hit hardest. He said: ‘There is a living wage being bandied about, but people will still be out of pocket.
‘If you are a two-parent family with two children, even on the current minimum wage, you would lose £2,200 with the tax credit changes. And with the living wage, you would only get back £1,560.
‘It doesn’t address the issue of the people on the bottom rung. It’s something that really needs to be addressed.’
Public sector employees are facing another four years of one per cent pay rises – except for MPs who are still on track to get 11 per cent this year.
State of the economy
BUSINESS leaders have welcomed steps taken to help companies grow and create new jobs.
The chancellor slashed the rate of corporation tax again in a boost to more than a million firms.
He said companies already pay the lowest rate of corporation tax in the G20 group of countries, after a series of reductions brought it down from 28 per cent in 2010 to 20 per cent. Now it will be cut again to 18 per cent in 2020.
Tim Forer, a partner in the employment team at Portsmouth law firm Blake Morgan, said: ‘Businesses will welcome small but significant measures such as further cuts to corporation tax to 18 per cent by 2020, and the rise in the annual investment allowance to £200,000 a year.
‘Both encourage start-ups and smaller firms to grow and could encourage employment.’
Maureen Frost, deputy chief executive of Hampshire Chamber of Commerce, said: ‘We welcome the chancellor’s clarity on a number of measures that will help maintain and strengthen business activity in Hampshire.
‘These include the cuts in corporation tax, commitment to childcare, the new permanent annual investment allowance and, for some small businesses, lower national insurance contributions.’