Chancellor George Osborne will deliver the first Budget of this parliament on Wednesday 8 July 2015 – the first Budget from a Conservative government for almost 19 years.
The Summer Budget is likely to set out what reforms the government wants to make to tax, benefits and overall public spending as it looks to deal with the deficit.
According to the Institute for Fiscal Studies (IFS) the 8 July Budget may prove to be George Osborne’s best chance to bring in some much-needed reforms to the tax system. A budget for productivity requires a better, more predictable, tax system.
The IFS also predicts more public spending cuts. The Conservative Party manifesto committed to eliminating the deficit by 2018–19, largely through approx. £30bn reductions in public spending. David Cameron has implied that these cuts would be relatively easy to achieve because they mean “saving £1 a year in every £100 that government spends”. Unfortunately, growth in some areas of spending, and promises to protect other areas, mean that even if the government delivers on its commitment to find £12 billion of cuts to social security spending, unprotected departmental spending could be facing cuts of 15% over the next three years.
Alongside the upcoming budget, George Osborne will set out a plan for how to boost productivity. According to IFS at the end of 2014, UK productivity remained below its pre-recession level and 16% below where it would have been had the pre-recession trend continued. ONS figures show UK labour productivity went up by 0.3% in the first three months of this year compared with the last quarter of 2014. This was 1.3% higher than the same period in 2014 – the fastest annual growth since the first quarter of 2012. But much more is needed to boost productivity. And it is important that we see productivity across all sectors. For example while output per hours grew in the services sector, it fell in manufacturing and production, both for the quarter and year-on-year, the ONS said. It is only productivity growth that is likely to spur increases in real wage growth and living standards.
The first budgets of new parliaments often raise taxes and cut spending, however, according to the BBC, there are likely to be sweeteners in the form of a growth in income tax personal allowance and measures that effectively increase the threshold for paying inheritance tax.