John Bercow's campaign to stop George Osborne revealing the contents of his budget in advance, before parliament has been told, doesn't seem to be going too well. In fact, he's failing dismally. According to one source, the Treasury have already put out 11 budet-related stories and the broad outline of the tax changes being announced are already in the public domain. The personal tax allowance will rise to above £9,000 in April 2013 - to £9,205, according to ITN's Tom Bradby - and the 50p top rate of tax will be cut to 45p. These measures will be funded by taxes that hit the rich, including stamp duty going up from 5% to 7% on properties worth more than £2m, a crackdown on aggressive tax avoidance and some kind of limit on the amount of tax relief the very wealth can claim. You can read all the Guardian's budget coverage here, where there are full details of what has already come out. The cabinet were meeting at 8am to be briefed on the budget. But ministers could be forgiven for staying in bed because there is so much out there already.
So should we all pack and go home? Of course not. It's a budget, and so there's a plethora of announcements to report, plus all the drama, plus - all importantly - the politics. I'm Andrew Sparrow (AS) and I'll be covering it all in detail on this live blog today with my colleague Graeme Wearden (GW). We'll use initials to show who's writing what; if there are no initials on a post, that'll be because we think it probably doesn't matter. Broadly, I'll be writing about the politics and Graeme will be writing about the economics.
Here are two key timings that you need to know.
12pm: David Cameron and Ed Miliband clash at PMQs.
12.30pm: George Osborne delivers the budget.
2.30pm: The Office for Budget Responsibility holds a press conference.
This is a coalition budget, but coalitions are about negotiation and I'll be interested in trying to assess today's winners and losers. In particular, there are three conflicts worth focusing on.
1. The Tories v the Lib Dems. The Lib Dems wanted to increase the income tax threshold, and the Tories wanted to cut the 50p top rate of tax. Both sides appear to have chalked up significant wins. But is this a happy compromise, or has one side come out on top? We'll get a better idea by the end of the day.
2. The rich v the poor. In some respects this is similar to the first conflict, because the Lib Dems have said that helping those on low and middle incomes is their priority. But they are already describing it as a "Robin Hood budget", which is an extravagant boast. We'll see if it stands up.
3. The coalition v Labour. Oppositions do not attract much attention on budget day. But some Labour figures believe that a decision by Osborne to cut tax for those earning more than £150,000, at a time when all the polls suggest that that would be unpopular, would be a catastrophic political mistake. It could take weeks, or even longer, before we find out for sure whether or not that's true. But by 6pm tonight we'll be in a better position than we are now to guess how that debate is going to unfold. AS
Even without the deluge of leaks, the City isn't expecting many shocks today. George Osborne's hands are rather tied by his promise to deliver a fiscally neutral budget. That means any additional spending would have to be balanced by higher taxation.
And just a week ago, credit rating agency Fitch warned the chancellor not to ease up on the pace of fiscal consolidation, as it cut the UK's outlook to negative. Giveaways are firmly off the menu.
The latest economic forecasts may be encouraging, with predictions that GDP growth for 2012 could be revised to 0.8%, from 0.7%. That reflects the fact that today's Budget is being delivered in a calmer economic climate than last November's autumn statement, when the eurozone debt crisis was raging.
Economists also believe that Osborne may be able to announce that the UK deficit will drop back below the £100bn mark in 2012/13, thanks to the decision to take over the Royal Mail's pension scheme (something critics dismiss as an 'accounting trick').
Business leaders, thirsty for loans, want to hear full details of the new credit easing plans, and would also welcome any credible measures to stimulate growth (Sir Richard Branson, for example, has called for a new fund to encourage young entrepreneurs). And having led the attacks on the 50p top tax rate, they're likely to cheer the loudest if Osborne announces he is abolishing it. GW
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Andrew Sparrow
Photograph: Felix Clay
As usual, there's been lots of budget comment on the early news programme. Here's a selection. I've taken the quotes from PoliticsHome.
From Tim Farron (pictured), the Lib Dem president
I hope very much that [the rich] won't be paying less tax. I hope very much they will be paying more, however the government decides to extract that. I think at a time like this to give a tax cut to the wealthiest 1% would be something that would be morally wrong and economically foolish. I don't think they will be [doing that]. Whatever happens, that 1% of tax payers who are supposed to pay the 50% tax must - in my view - pay more tax at the end of the day than they are at this point of the day.
From the economist Tim Congdon
Everyone wants to know what's going to happen in the next few years, stability is very important, so it's a good thing in a way if the leaks come out, not just in advance but months before the Budget so people know what's going on and I don't think there's anything really the matter with that.
Photograph: Getty Images
Trying to assess whether a budget succeeds or fails is a complex business, and all judgments are ultimately successful, but, for those short of time, there is one fairly simple measure we can use today. If the headlines are all about the tax cut for the 20m people who pay the basic rate of tax, then Osborne is doing well. But if the headlines are all about a tax cut for those on £150,000 who pay the 50p rate, then Osborne (and his spin doctors) are doing badly.
Judging by the papers, Osborne is doing well. The Daily Telegraph and the Times have both splashed on the budget, with stories focusing on the tax cut for lower and middle-income earners. And the Financial Times has splashed on the stamp duty increase, which is also the main focus of the Guardian's main budget stories.
But, worryingly for Osborne, the broadcasters want to talk about 50p. Michael Fallon (pictured), the Conservative deputy chairman, was asked about it on Radio 5 Live. He said it had to go because it was "the third highest tax on the planet".
Primarily it's a budget for working people that's going to help people on lower and middle income. The top rate was always announced to be temporary, that's what the Labour government announced at the time....I think we'll see today that people were avoiding it, it was the third highest tax on the planet if you add the national insurance of 2.5%. Taking half your income away in tax wasn't efficient it was distorted and it needed to be corrected.
Owen Smith, the shadow Treasury minister, was on the same programme and seized on the "planet" reference.
Michael mentions the planet, you need to be on another planet to think you can have a budget where we're going to cut taxes for the richest 1% in this country and then plausibly describe that as fair.
Lord Lawson, who cut the top rate to 40p when he was chancellor in the 1980s, joined the argument on Radio 4. As you would expect, he defended Osborne's decision to get rid of the 50p rate.
The 50p is purely just for politics. If you factor in behavioural changes - people taking advantage of various tax dodges and legal loopholes - if you take those into account, people moving abroad, then in fact it doesn't bring in any revenue at all, so it doesn't cost you anything to cut it, and it does benefit the economy and benefit enterprise.
I've taken the quotes from PoliticsHome. AS
One boast that George Osborne can't repeat today is that Britain's borrowing costs are below Germany's.
In the Autumn Statement last November the chancellor pointed to the UK's 'safe haven' status, telling parliament that: "Yesterday, we were even borrowing money more cheaply than Germany".
Not any more. This morning in the bond markets the interest rate on 10-year gilts (called the yield) is 2.43%, versus just 2.06% for Germany's 10-year debt. The 'spread' between the two yields has been rising since the crisis in the eurozone calmed. That shows that investors expect a higher rate of return when they buy new UK bonds rather than the German equivalent.
In historic terms, Britain's borrowing costs remain low. Bond experts reckon that sovereign bond yields are rising because 'the markets' are anticipating higher levels of inflation. As city firm M&G put it, the Federal Reserve, the Bank of England and the European Central Bank "all have a clear and visible inflationary bias." Inflation, of course, is a classic way of dealing with a country's debts. GW
Photograph: Jonathan Hordle / Rex Features
Ed Miliband will be responding to the budget statement today. He's put out a press statement giving us an early flavour of what his message will be. It doesn't contain any surprises.
It is completely the wrong priority to cut taxes for the richest people in Britain earning over £150,000 a year.
The government's economic plan is failing.
What we need today is action to get jobs and growth moving in this country.
What the chancellor must do is ensure that every penny he can raise from those at the top is spent on helping millions of ordinary families who are struggling to get by.
The troubled state of the UK retail sector was highlighted this morning by Game Group, which has moved closer to collapse. Game asked the London stock exchange to suspend its shares, admitting that the company no longer has any value. The company employs 10,000 staff, and there are fears that half its 600 UK stores may close.
Game had blamed slumping sales on the general consumer slowdown, but in truth the high street chain has also suffered from tough competition online. Still, it's not the ideal backgroup to the budget. GW
To coincide with the Lib Dem spring conference, the Times published a negative profile of Danny Alexander, the chief secretary to the Treasury, suggesting that his Lib Dem colleagues thought he was turning Tory. In the spirit of even-handedness, the Times have today published a negative profile of George Osborne (paywall). It's by Sam Coates. Here's an extract.
Strip away the political showman, the arch-tactician and polling devotee, and there does lurk a question mark over the wisdom of his biggest decisions of the past seven years.
For it was Mr Osborne who initially hitched Mr Cameron to Gordon Brown's spending plans, promising to "share the proceeds of growth" between public spending and tax cuts. Just four years later, he was running an election campaign rubbishing Labour's overspending in precisely this period, managing quite effectively to excise this episode from the public memory.
Then there was Mr Osborne's million-pound moment in 2007. The then Shadow Chancellor's announcement in that year that he would raise the inheritance threshold to £1 million succeeded in averting potential electoral catastrophe against a briefly dominant Brown. Yet the politically astute policy quickly became an albatross, undermining the modernisation drive, reminding voters of toxic Tory political priorities and prompting questions about funding.
The idea was quietly abandoned in the coalition negotiations. So too was the fair fuel stabiliser, which Mr Osborne's team stumbled to explain at the time and were never able to implement in Government.
However, the decision that scarred Tory MPs most was the announcement of the removal of child benefit from higher rate tax earners at the 2010 Tory party conference. Designed to demonstrate how the wealthier would share in the pain of deficit reduction, the sums were wrong, little thought was put into the "cliff edge" for single-earner households or the more practical side of implementation.
This policy created a rare split between No 10 and No 11, with the Chancellor digging in his heels. Yet this year at a meeting of parliamentary private secretaries, Mr Cameron went round the room one by one asking what they thought of the child benefit cut. It was as if the Prime Minister was amassing ballast to use against his friend, according to one witness.
Photograph: Leon Neal/AFP/Getty Images
David Laws (pictured), the Lib Dem former chief secretary to the Treasury, was on BBC News earlier defending the decision to get rid of the 50p top rate of tax.
To those people who are concerned about anything that happens on the 50p rate I'd say this: the problem when Labour introduced 50p is that they introduced it into a tax system that was riddled with loopholes in ways for the rich to avoid tax, and I suspect we will find today the 50p rate has not been making anything like the contribution that the Labour government said it would make. If the Chancellor was to find other ways of taxing very wealthy people and raising more money from those people, that is surely the right thing to do.
According to PoliticsHome, Laws also offered his version of the Lib Dem test for the budget.
For us, the key issue is that there shouldn't be a net giveaway in tax to the wealthy during a time of austerity, but what we want to look at is the substance of this, not the symbolism. It is more important that the rich should be paying the same or preferably more after this budget than precisely which tax rate we tinker around with.
This is broadly similar to what Tim Farron was saying (see 8.46am), but note the subtle difference. Farron said he wanted to know that the wealthy were paying more. Laws just said it was important to ensure that they were not paying less.
As a reminder of how fast the Lib Dem position on the 50p rate has shifted, it's worth remembering that just last summer Danny Alexander was saying that the Tories calling for the abolition of the 50p top rate of tax were living "in cloud cuckoo land". AS
The latest public sector borrowing figures have dealt a blow to George Osborne, just three hours before he begins the Budget speech.
The UK's public sector net borrowing hit £15.2bn in February, up from £8.9bn a year earlier. That's a record high for a February, and much worse than expected. City experts had forecast a figure of around £8bn (the data excludes the cost of the government's intervention in the banking sector).
The pound dropped sharply, losing almost half a cent against the US dollar to $1.584.
The immediate reaction in the City is that this gives the chancellor less wriggle room. Economists had predicted that UK borrowing for this year might be slightly lower than forecast -- this morning's data suggests any undershoot will be smaller.
UK Public Finances show George can't afford to be too generous later today #2012budget
— Mike van Dulken (@Accendo_Mike) March 21, 2012
Separately, the minutes of the Bank of England's last monetary policy committee found that two policy makers wanted more quantitative easing (buying government bonds with newly created money), but were outvoted. The Bank also said it was "more certain" that UK growth would pick up in the near term, but that "significant' downside risks remained. GW
While Ed Balls may enjoy today's Times, which is having a blast at George Osborne (see 9.33am), he should probably avoid the Independent, where he's the subject of a vicious hatchet job by Matthew Norman. AS
Lots of people have been using this joke today. Here it is, just in case you haven't heard it.
Basically today's statement at 1230 will be more a review of the papers than a proper budget
— Chris Bryant (@ChrisBryantMP) March 21, 2012
And here a budget day tweet from Ed Miliband.
Chancellor must ensure every penny he can raise from those at the top is spent on helping ordinary families struggling to get by #budget
— Ed Miliband (@Ed_Miliband) March 21, 2012
You can read all the Guardian's budget coverage here.
As for the rest of the papers, here are some stories and articles that are particularly interesting.
In the next 18 months or so, George Osborne will have to provide more details of his plans for public spending in the coming years, up to the election and beyond. That will be, in policy terms, much more significant than what will be said today. The implications of his announcement last year that he was sticking to his spending plans, even if it takes him longer to achieve his goal, have not been sufficiently understood.
What it means is that the Government is going to have another full round of spending cuts that is as severe as the one it has already imposed. Indeed more severe, because the coalition has picked the low-hanging fruit. Last time around, for instance, they could move from using one set of price indicators to upgrade benefits to using another lower one and save a fortune. But next time?
For many departments, a full new round of cuts will require a fundamental reappraisal of the scope of the services they are able to provide. This — and not this Budget or any subsequent Budget — will be the Chancellor's most important statement of recent times.
"The Lib Dems overplayed their hand," said one senior Tory MP. "They aren't going to get a mansion tax or a tycoon tax. It's looking like a very Tory Budget."Removal of the 50p rate leaves Mr Clegg vulnerable to claims he is a Tory stooge, hence his party's voluble claim that the Budget would have a "Robin Hood" theme, taking money from the rich to fund a big rise in the tax threshold to about £9,000 to help low earners.
Some Lib Dems say they are happy with the deal, especially with a stamp duty rise on homes worth more than £2m – a policy they say amounts to a "mansion sales tax". Others believe the party should have held out for more.
On some issues – such as a switch to property taxes – the liberal-minded Mr Osborne and the Treasury technocrats have been closer to Mr Clegg than to Mr Cameron. It was the prime minister, for example, who ordered his chancellor to soften the impact of withdrawing child benefits from households with a high earner. "It's a very popular policy," says one ally of Mr Osborne. "Left to his own devices, George would have left it as it was."
Only one in five business leaders detects "green shoots" in the economy, according to a ComRes survey for The Independent.
While 21 per cent believe their own sector is growing, a bigger proportion (31 per cent) think it is still contracting, while 42 per cent say it is staying the same.
The Daily Telegraph understands that the Chancellor will stick to the tax and spending "envelope" outlined in the pre-Budget report. However, there will be an "overall cut in spending" in the "low billions" to balance the books.
When Mr Osborne's predecessor announced the 50 per cent rate, he pulled off a new and under-discussed trick (under-discussed because only high earners suffer from it, and who cares about them?). He said that those who paid the top rate should no longer receive tax-free personal allowances.
This could be taken further. You could say that people who earn more than £200,000, say, would not get the benefit of the 20 per cent rate either. They would pay 40 per cent, or 45 per cent, on every penny of earnings. And they would enjoy no reliefs of any kind, pension or otherwise. And carried interest would be taxed at 40 or 45 per cent. And the marginal rate would have come down (40 per cent is better), however the rich would pay plenty. We need a better system.
Just don't believe a "crackdown on tax avoidance" will do the trick. If there is a flagrant loophole, close it. But if crackdowns worked, Greece would be Norway.
As our competitors move rapidly, what are we doing about growth? The Government has endless policy reviews and consultation frameworks: there is the Strategy for Sustainable Growth; the Path to Strong Sustainable and Balanced Growth; and the Plan for Growth. It seems we are extremely good at growing plans, but not growth. Today's Budget needs to change that.
I was in China last week, and business leaders laughed when I told them the UK Government was pursuing a "balanced agenda for growth". They see a country that makes it almost impossible to do business. It is difficult and expensive to get visas; there are very few air links; and taxes are too high. They told me we would be better pursuing unbalanced growth over a balanced recession.
We learnt overnight that George Osborne is going to increase stamp duty on homes worth more than £2m. Here's a stamp duty reading list.
• Polly Curtis at Reality Check says raising stamp duty to 7% for homes worth more than £2m would only raise an extra £56.6m.
House sales fluctuate through the year but if you averaged what we know for those months already that would mean around 1422 houses worth more than £2m a year were sold at the cost of at the very least £2.84bn. I've good reason to believe that this figure is a fairly good estimate. Under the current system, if all those people pay stamp duty, it would raise £142.2m. At 7% it would raise £198.8m – an additional £56.6m. These are residential sales only – it's not clear whether Osborne's tax would apply to commercial properties too.
In part because the revenue it raises have risen quickly with house prices. But also because it is judged to be a less painful tax to get the public to go along with compared to many others. People pay it at a time - uniquely - when they are spending very large sums of money that the stamp duty tax bill is tagged onto. A tax bill of £20,000 incurred when buying a house for £500,000 may feel less painful to many than getting an annual bill of around £2,000 for 10 years for living in the same house. And unlike serious reform of our out-dated council tax system, or indeed the introduction of a proper Mansion Tax, increasing Stamp Duty doesn't require a wider revaluation - that most dreaded of political events. Nor does it suffer from the fabled problem of hammering the old lady on a low income living in an expensive house.
Vast numbers of expensive properties have been transferred into the ownership of offshore companies - where the stamp duty charge is just 0.5% when the offshore company is purchased.
HMRC thinks it can abolish the loophole which allows this much lower charge on offshore companies.
But accountants warn it won't be easy: the government dare not introduce a 7% stamp duty charge on purchases of shares in all companies; and if the higher stamp rate is restricted to companies whose only asset is a house, proving that's the case won't be easy for companies registered in secretive tax havens such as the Cayman Islands.
One of the many (many!) budget details that have appeared in the newspapers in the last few days is that the Treasury will take the Royal Mail final-salary retirement scheme on to the government's books. The scheme holds assets of £28bn, which can be set against borrowing for the 2012/13 financial year.
Last November, the OBR predicted that the UK would borrow £120bn in the next financial year. Adding the Royal Mail pension scheme into the mix should bring the deficit below £100bn for the first time 2008/09, when the financial crisis began.
Good news? Perhaps not. For one thing, the Royal Mail pension fund has liabilities of £37bn, so taxpayers are actually picking up an €9bn shortfall. This has prompted the Daily Mail to blast MPs as 'hypocrites' for planning such a move, while Rachel Reeves, Labour's shadow chief secretary to the Treasury, dismissed it as 'smoke and mirrors'.
Open Europe, the think tank, points out that Portugal has made similar accounting changes recently. This allowed the country, which was bailed out by the IMF last year, to "magically" improve its public finances. Portugal, which may yet need a second aid package, is hardly an ideal role-model for the UK.
As Open Europe's Raoul Ruparel told us: "this is far from a free lunch and the money should be used conservatively. GW
We've launched our Budget glossary this morning, explaining some of the terminology which the chancellor may use in his speech. It's here, covering everything from alcohol duty to the winter fuel allowance.
Our colleague Simon Goodley has also rounded up the latest Budget betting, here. The bookies reckon we're odds-on to hear Osborne (who apparently is the thirstiest chancellor on record) to mention Britain's "triple A rating". You can also get 5/1 on Vince Cable shaking his head during the speech.
In the comments below, readers have come up with some great ideas for Budget Bingo.
Politics Home has handily created its own budget bingo board, so here are some popular choices for our own bingo card (with thanks to our colleague Laura Oliver)
"The mess we inherited"
"13 years of Labour"
"The nations credit card"
"We are all in this together"
"Record low borrowing costs"
"Britain is a safe haven"
"Navigating troubled waters"
"This coalition government is working tirelessly to ensure that everyone contributes"
"Eased the markets fears"
"The economy inherited from Labour/previous govt"
"confirmed by the indepedent Office of Budget Resposibility"
"Would you like to buy: a watch / a road / the health service / a school / our children's futures / my grandmother"
IntravenousDeMilo came up with:
'Maxed out credit card'
'Fair but responsible'
'Paying down the debts we inherited'
'Without these changes [beloved INSTITUTION] would not be sustainable'
And we had some good suggestions over Twitter:
@GdnPolitics 'clearing up the mess left by xxx - [insert party of choice] #budgetbingo from @paulonpolitics .
@GdnPolitics "we inherited from previous government" from @Spiller32 .
So do play along at home if you can.
We've had a lot of pre-budget polling over the last week or so. Here's a guide to some of the key findings.
• A YouGov poll for the Sun today (pdf). It shows that cutting fuel duty would be the most popular tax cut, closely followed by increasing the personal allowance to £10,000.
• A post from Anthony Wells at UK Polling Report summarising the findings of various YouGov budget polls. Among other points, he says YouGov polling shows "widespread opposition to the abolition of the 50p rate".
• A ComRes poll from the weekend with figures for various possible budget measures (pdf).
Here's the summary of the findings from the ComRes news release.
Raise the starting point of income tax from £7,475 to £10,000
Agree: 81% Disagree: 8%
Older people are more likely to agree than younger people – 87% of people aged 55 and over do so compared with 55% of people aged 18-24. Voters for all three main parties show similar levels of support for this.
Abolish the 50 per cent tax rate on incomes over £150,000
Agree: 21% Disagree: 58%
A majority of Conservative voters (51%) disagree that the 50 per cent tax rate should be abolished, as do 67% of Labour voters and 70% of Lib Dem voters.
Introduce an annual "mansion tax" on properties worth over £2m
Agree: 64% Disagree: 20%
The majority of Conservative voters (59%) agree with an annual "mansion tax" compared with 66% of Lib Dems, and 72% of Labour voters.
Introduce a minimum income tax rate of around 30 per cent, that everyone should pay, regardless of tax reliefs and schemes to reduce tax liability
Agree: 12% Disagree: 63%
Nick Clegg's proposal for a "tycoon tax" is unpopular with supporters of all parties. Liberal Democrat sources were steering journalists to a level for the "tycoon tax" of between 20 and 30 per cent, so we asked about 30 per cent; presumably respondents did not like it because it is higher than the 20 per cent basic rate and they thought it might hit them.
Continue to pay child benefit to people paying the 40 per cent tax rate (over £42,475 a year), rather than cutting it as planned
Agree: 25% Disagree: 58%
Cut duty on petrol and diesel before cutting any other taxes
Agree: 74% Disagree: 15%
Younger people are less likely to agree than older people – 65% 18-24 year olds and 64% of 25-34 year olds agree, compared with 83% of people aged 65 and over. This cut is supported by 80% of Conservative voters, compared to 74% of Labour and 65% of Lib Dem voters.
Introduce a minimum price for a unit of alcohol
Agree: 44% Disagree: 41%
Supported by 51% of Conservative voters and 56% of Lib Dems.
Freeze the duty on beer in order to help save Britain's pubs
Agree: 54% Disagree: 27%
We also asked if people agreed or disagreed with more general statements about the economy. A pair of statements about trust on the economy produced poor figures for Ed Miliband and Ed Balls:
I trust David Cameron and George Osborne to make the right decisions about the economy
Agree: 29% (-1 since November) Disagree: 49% (+4)
I trust Ed Miliband and Ed Balls to make the right decisions about the economy
Agree: 15% (-6 since November) Disagree: 59% (+9)
• Ipsos MORI in the Evening Standard yesterday. It suggests people will not believe George Osborne if he says the rich will pay most.
Ipsos MORI's pre-Budget Political Monitor for the Evening Standard shows that half (50%) of the British public think people on high incomes will benefit the most from the measures the Chancellor will announce in Wednesday's Budget. Only 17% expect those on low incomes to benefit the most, and 18% say those on middle incomes.
George Osborne has left Downing Street for the House of Commons. At Westminster the TV helicopter overhead is making a racket.
My colleague Shiv Malik has sent us this.
There's currently a 150-strong demonstration outside Downing Street called by UK Uncut and the PCS union and joined by other campaigning groups, including those calling for a Robin Hood tax. They've attempted to recreate the Tories' iconic 1979 election poster, Labour isn't Working, by forming a long snaking queue in pairs from Downing street's front gate.
Today George Osborne is expected to announce a crackdown on aggressive tax avoidance. He will be following up ideas set out in a report for the Treasury by Graham Aaronson QC, which was published last year. Aaronson proposed a "narrowly-focused" general anti-abuse rule (GAAR).
Here is some background on the proposal.
• The Treasury press notice about the Aaronson report.
• The Aaronson report in full (pdf).
• A blog from Richard Murphy saying the Aaronson plan would only have a limited effect.
Here's George Osborne on the steps of Number 11.
Chancellor of the Exchequer George Osborne holds up his red Ministerial Box outside 11 Downing Street Photograph: Lewis Whyld/PA
PMQs is coming soon.
The BBC's live coverage is running into problems. Jon Sopel was trying to interview Tim Farron, Claire Perry and Chris Leslie on the open-air platform on Abingdon Green, opposite Parliament. But he had to wind it up early because protesters were shouting so loudly. I think they were shouting tax the rich.
Labour has seized on this morning's disappointing public borrowing figures (at £15.2bn, the worst February data on record).
Rachel Reeves MP, Labour's shadow chief secretary to the Treasury, said it was proof that the government's fiscal plan is "wildly off track". She said:
The autumn statement showed George Osborne is set to borrow £158 billion more than planned at the time of his spending review because of the higher unemployment and slow growth his failed policies have delivered. And today's figures show he borrowed £6 billion more in February than in the same month last year. By choking off the recovery, pushing up unemployment and so borrowing billions more to pay for economic failure, cutting spending and raising taxes too far and too fast has backfired.
A Treasury spokesman has blamed the figures on "growth in departmental spending" and "weak" income tax receipts.
Vicky Redwood, chief UK economist at Capital Economics, has analysed the data and concluded that borrowing for the current financial year will only be "a couple of billion pounds" below previous forecasts. That's not enough to fund many budget giveaways.
Redwood added:
Growth of tax receipts slowed and, after underspending for the rest of the financial year, departments appear to have had a final splurge.
PMQs is underway. David Cameron has just attacked Ed Miliband for pulling "a sickie" when he was meant to be addressing an NHS rally.
Ed Miliband asks about the withdrawal of troops from Afghanistan. Cameron says further progress on the plans will be made at the Nato summit in Chicago.
Miliband asks about the discussions Cameron has had about this with Hamid Karzai, the Afghan president. Cameron says he has been in "permanent touch" with the Afghans about the transition.
Intriguingly, he says George Osborne will be talking about the need to "make the most" of the transition in his budget statement.
Does that mean Osborne has found a peace divident to spend?
Cameron says the car industry is doing well. Car firms are expanding.
That's very good news for manufacturing, he says.
George Osborne hasn't started, but we are already on taxes. Cameron has a go at Ken Livingstone's tax arrangements. He says Livingstone has offered to pay his taxes in full (ie, not to channel earnings through a company, legally) if he wins the mayoral election. Cameron says he has some political advice for Livingstone. It's best to start paying your taxes at the beginning of your campaign, he says.
Ed Miliband asks about the riots. Only around half of those who have made claims under the Riot Damages Act have had compensation, he says. Does Cameron agree that that is not good enough?
Cameron accepts this. He will chase this up. But other compensation funds were set up too, he says.
Miliband mentions a particular victim still waiting for compensation. Cameron says he will look into that case.
Miliband says proper information about compensation payments needs to be released, a minister needs to be put in charge and Cameron needs to come back to the Commons with answers.
Cameron says he will put information into the library of the Commons. Nick Herbert, the policing minister, is in charge. But Cameron is taking an interest too, he says.
In the City, traders are poised for the budget to begin -- but there's disappointment that much of the speech already appears to have leaked.
Josh Raymond of City Index predicted that construction, retail and bank shares could be moved by Osborne. As he pointed out, shares in Tesco, Sainsburys and Morrisons have already rallied this week following reports that Sunday trading hours could be relaxed.
Michael Hewson of CMC Markets predicted that today will be "less about the economics and more about the politics".
"Oh for the days when we really did find out [the Budget details] on the day," he added.
The FTSE 100 is up just 2 points at 5894, so it's really quite calm. GW
Intriguing tweet from Prospect's James Macintyre.
I understand that Clegg now agrees with Cameron that wd be better if Cable wasn't in Cabinet.
— James Macintyre (@James_Macintyre) March 21, 2012
Back in the Commons Labour's Graham Allen asks Cameron if he will agree to ensure that next year's budget focuses on early intervention.
Cameron says that making a budget submission this early is a particularly good example of early intervention. He says he will look at the idea, and applauds Allan for all he has done to promote early intervention as a solution to social problems.
Labour's Mary Glindon asks about tax cuts for the rich and cuts to child tax credit.
Cameron says tax credits have gone up. And, with reference to the "very richest", he says: "After this budget they will pay more tax."
Nick Boles, a Conservative, says that leading conservatives like Lord Tebbit and Lord Satchi have been arguing for years for the low-paid to be taken out of income tax. Does Cameron agree that this is a thoroughly Conservative idea.
Cameron tells the Speaker that this is a kaleidescope budget (referring to John Bercow's speech yesterday, which has been widely mocked in today's papers).
Bercow says he is glad Cameron is using his language.
The statement is about to start.
The Treasury tweet during the budget. Here is their feed.
George Osborne is starting.
He says this budget rewards work.
But it will also be a reforming budget, that repairs the "disastrous" decisions taken under Labour, when manufacturing declines.
Millions of the lowest paid will be lifted out of tax altogether.
And revenues from the richest will increase.
Osborne says the report from the OBR reminds us of the risks to recovery.
The OBR are sharply revising down their forecast for Eurozone growth.
• Eurozone growth forecast down 0.8%, to -0.3.
• World growth forecest also downgraded, by 0.2% and 0.3%.
But Britain will avoid a technical recession.
• Growth forecast for 2012 revised up to 0.8%.
For 2013, growth of 2% is forecast, followed by 2.7%, then 3%, then 3%.
• Unemployment to peak this year at 8.7%.
• Claimant count forecast down. Now expected to peak at 1.67m.
Osborne says quantitative easing will remain in place.
• Deficit falling, and forecast to reach 7.6% next year.
This is a fiscally neutral budget, he says, achieved by a "modest reduction" in taxation and spending.
• Borrowing forecast to be £126bn this year - £1bn less than forecast last year.
Osborne says the OBR says the government is on course to eliminate the structure deficit by 2016-17.
• Public sector net debt to peak at 76.3% in 2014-15.
Osborne says he will not abandon his deficit reduction plan.
He will not spend the windfall from the Royal Mail pension scheme. Instead, he will use it to pay off debt.
Osborne says welfare needs to be curbed.
He is publishing information showing that welfare spending would have to be cut by £10bn in the next spending review if the system carries on as it is.
Osborne says UK forces will cease combat operations in Afghanistan in 2014.
Operations will cost £2.4bn less than planned over this parliament, he says.
Some of the benefit of the lower cost will go to soldiers.
• An extra £100m to be spent on accommodation for soldiers.
• Family welfare grant for service families to be doubled.
• Extra council tax relief for service families.
Osborne turns to gilts.
At present, the Treasury offers a 50-year gilt.
It will explore the case for gilts with longer redemption periods (ie, 100 year ones) and ones which are never redeemed at all, but which pay perpetuable income.
Osborne says Britain's gold reserves would be worth six times as much now as they were worth when Gordon Brown sold them off.
Osborne turns to credit easing.
There will be extra funding to pay for new homes, he says.
Stability and credibility are necessary for growth, he says. But they are not sufficient.
Britain became seduced by cheap finance.
Britain must ensure it is not left behind countries like Brazil. This is the govenrment's resolve.
Osborne says Britain is in the top 10 of countries deemed good place for doing business. But it must do better.
Britain has a reputation as a "remarkably open place" for investment. Protectionist rhetoric must not be allowed.
Osborne says he wants the Chinese currency to be traded in London.
Osborne says the government must confront the lack of airport capacity in the south east.
We cannot cut ourselves off from growing markets, he says.
Turning to transport, he says Network Rail will upgrade lines in the north of England. They were neglected under Labour, he says.
Osborne says the government has struck a deal with Manchester to develop infrastructure in the city.
Turning to London, he says he will work with Boris Johnson on new infrastructure projects. There will be a £70m development zone, he says.
Twenty four enterprise zones are going ahead across the UK.
Enhanced capital allowances will be created for enterprise zones in Scotland.
Osborne says renewable energy will play a crucial role in the future.
But he will be alert to the costs. What is environmentally sustainable must be fiscally sustainable too, he says.
Gas will be the largest source of energy in coming years. A new gas generation strategy will be set out in the autumn.
Taxation for the North Sea oil and gas industry will change.
• A £3bn new field allowance will be created for investment west of Shetland.
Osborne says the government is supporting the life sciences sector. Taxes on patents are being cut.
Britain's government debt has strengthened slightly since the budget began, pushing down the yield (effectively the interest rate) on 10-year gilts to 2.38%.
The news that Britain may sell perpetual bonds (which will never be repaid) didn't cause any alarm (perhaps because the proposal emerged last week).
The pound has also crept a little higher against the US dollar to $1.584. There was little impact from the new GDP forecasts, with the prediction of 0.8% growth this year (from 0.7%) balanced from the lower forecast of 2% growth in 2013 (down from 2.1%).
Alexandra Jones, chief executive of Centre for Cities, said that Osborne's prediction that the UK will avoid a technical recession this year was welcome, but pointed out that "we're still recovering much more slowly than we did from the last recession in the early 1990s." GW
Back to the statement, Osborne announces tax breaks for the film industry. It is the policy of this goverment "to keep Wallace and Grommet exactly where they are", he says, to loud cheers.
That's because Ed Miliband is sometimes depicted as Wallace.
Osborne says Lord Heseltine has been asked to review how the government could work better on development projects with the private sector.
He turns to planning.
Britain has lost job because firms could not get planning permission.
Next week, the new planning rules will be published.
Guidance running to 1,000 pages will be replaced by guidance running to just 50 pages.
• New planning rules to come into force next Tuesday.
• Sunday trading laws will be relaxed for eight Sundays only, starting on 22 July.
Osborne says he is exploring enterprise loans.
• Young people could get loans to start up businesses.
Osborne turns to regional pay.
Labour introduced this for the Court Service, he says. And Labour is now in favour of regional benefit rates, he says.
The pay review bodies will consider regional public sector pay. Today the Treasury is publishing its submission.
Osborne turns to taxation. And he quotes Adam Smith's principles of good taxation, including simplicity and the rich paying most.
Taxation should be simplified.
• Treasury to consult on a new cash system for small firms with a turnover of up to £77,000. That would make it easier for them to fill in their tax returns.
• A consultation on merging tax and national insurance payment systems to be published next month.
• Plans to reduce VAT loopholes being published today.
• Age-related allowances to be simplified. Many pensioners do not understand them, he says.
• A new single personal allowance for pensioners. No pensioner will lose in cash terms, he says.
Osborne says the government wants to simplify the pensions system. It is too complicated, he says.
• A new single-tier pension worth about £140 will be introduced. It will be based on contributions and cost no more than the current system.
Osborne says the Tory MP Ben Gummer recently propsed giving taxpayers a statement saying what their money goes on.
Osborne says this is an excellent idea. He will introduce it from 2014.
Osborne says he wants to make the tax system more competitive for business.
Tax for small firms has already been cut. And national insurance for employers has been cut.
• An above-the-line R&D tax credit to be introduced next year.
The Treasury will review what more can be done to help firms, he says.
• Corporation tax to be cut by 1% this year. From April corporation tax will be just 24%. The two further cuts will go ahead, so by 2014 it will be 22%. This means corporation tax will be "dramatically lower" than in competition countries.
That will put the government within sight of a 20% rate, which would put corporation tax in line with the basic rate of tax.
• Bank levy to go up, so that banks do not benefit from the coporation tax cut.
Osborne has turned to duty.
• No change to alcohol duty.
• Tobacco duty to go up by 5%. A packet of cigarettes will cost an extra 37p from tonight.
• A new machine games duty to be introduced.
Osborne says that, as a result of changes introduced by Labour, online gambling has moved off-shore.
The government will deal with this by taxing gambling based on the place of consumption.
Osborne turns to fuel duty.
The government has already cut fuel duty, he says, by £4.5bn.
• No further change to fuel duty.
• Vehicle excise duty (VED) goes up in line with inflation.
• VED frozen for road hauliers.
Osborne turns to personal taxation.
Under Labour, some wealthy people said they paid less in tax than their cleaners.
Tax evasion is "morally repugnant", he says.
Tax avoidance measures in the budget will save £1bn over five years.
• A crackdown on aggressive tax avoidance to be introduced, in line with the GAAR proposal from Graham Aaronson. (See 11.46am.)
• A new 15% charge on people who buy homes in corporate envelopes.
• A new 7% stamp duty will be introduced on homes worth more than £2m from tonight.
Most rich people pay a lot of tax, he says. But it cannot be right for people to make use of some tax reliefs year after year.
Some tax reliefs are already capped, like pension relief.
• No significant changes to pension relief.
• Anyone claiming tax reliefs worth more than £50,000 will have their total relief capped at 25% of income.
Turning to the 50p rate, he says it has caused "massive distortions".
Income worth £16bn was paid early to avoid the tax, he says.
Self-assessment revenue is down.
• The 50p rate has raised just around £1bn, he says.
But other tax losses may cancel that out.
• Top rate to go down to 45p from April next year.
He says no chancellor can justify a tax rate "that damages our economy and raises next to nothing".
Osborne says Ed Balls said the OBR should pass judgment on scrapping the 50p rate.
They have passed judgment, he says.
• Cutting the 50p rate will cost £100m, he says. The OBR says that is reasonable.
• Other taxes on the wealthy in the budget to raise £500m.
Osborne is turning to child benefit.
It won't be withdrawn all at once.
• Child benefit only to be taken from those earning more than £50,000.
• After the £50,000 threshold, it will be removed at the rate of 1% every £100. So there will no be cliff edge, he says.
• Only those earning more than £60,000 will lose out completely.
Osborne says he wants to go "further and faster" (Nick Clegg's phrase) in lifting the income tax allowance.
• Income tax allowance to go up by £1,100 to £9,205.
• Anyone earning up to £100,000 will benefit. They will get £220 a year, or £170 after inflation.
• People on the minimum wage will have had their tax bills halved under the coalition. Some 2m people will have been taken out of tax altogether.
That's it.
There's a (predictably) mixed reaction to the budget on Twitter, and beyond. Here's an early flavour:
Dr Ros Altmann of the Saga Group criticised the decision to nationalise the Royal Mail's pension scheme.
#RoyalMail pension scheme assets of £28bn will help pay down debt. so short-sighted to create another unfunded pension scheme
In the City, the news that the UK will rebuild its gold reserve alarmed trader Nicola Duke, who tweeted:
I keep trying to check - did Osborne really say he would buy gold at 1650 (the same gold that we sold at $275?) #TheyAreAllMuppets
Accountant and tax researcher Richard Murphy wasn't impressed that Osborne criticised previous chancellors for relying on low-cost borrowing, while also hailing Britain's current low borrowing costs:
Osborne says we've suffered from illusion of cheap finance - and yet he's just sung praises of it. Did he have this speech sanity checked?
Howard Archer, chief UK economist at IHS Global Insight, said Osborne had enjoyed the "rare luxury" of not having to revise his growth forecasts.
This is of welcome relief to the Chancellor and spares him having to tighten overall fiscal policy further. Indeed, the Chancellor has indicated that the budget is fiscally neutral over the next five years
Jeremy Cook, chief economist at World First, said the speech has "nothing to spook rating agencies", adding:
Everyone complaining that the budget is dull, is that not a good thing?
Ed Miliband is replying to Osborne now. I'll post full quotes from his speech later, but he summed it all up in his first line.
Today is the end of "we're all in it together".
Snap Verdict: Where's the money coming from? I was told recently by a government source that raising the income tax allowance would cost £3.5bn, but, having heard Osborne's speech, I can't work out where the money is coming from. I do know how Osborne is funding the abolition of the 50p top rate, because he told us this would cost just £100m (do you believe that?) and that he would raise an extra £500m from the rich. But, in terms of a budget, £500m is nothing. These particular tax changes might attract most of the media attention, but in fiscal terms they are insignificant. Which is why the budget spin is even more important than usual today. And, in spin terms, I'm surprised to find myself concluded that Nick Clegg is ahead. At PMQs Nick Boles bravely tried to claim that raising the tax allowance was a Tory idea. But Nick Clegg has been banging on about this in public for so long that he has firmly established ownership of this policy - whether Osborne likes it or not. More later. AS
Snap Economic/City verdict: Economically, the budget forecasts were presented to make the UK resemble the 'least ugly puppy in the shop', at least in Europe.
Raising growth forecasts for this year by just 0.1 percentage point is small reward for the progress made in dampening down the fires in Europe. Especially if you then trim 2013 forecast by the same amount. Pointing to the sharp cuts in eurozone growth forecasts showed exactly who Osborne blames for the weak world economy.
The increase in the bank levy (to counter cuts in corporation tax) show that the banking sector remains the number one punchbag for politicians of all stripes. Cue another round of rumours that banks might move their HQs? Probably not, because of the chancellor's move on income tax.....
Osborne's justification for cutting the 50p top tax rate to 45p smelled fishier than Grimsby pier to some critics, but it will be welcomed in financial quarters. Anything that makes London more attractive than Frankfurt goes down well in the City.
In the stock markets, the early victim of the budget was upmarket estate agent Savills, whose shares have fallen 3.4%. Is bashing estate agents the new banker bashing? GW
Some reaction to George Osborne's budget from readers on the politics live blog (with thanks to our colleague Hannah Waldram):
From VSLVSL:
As predicted Osborne's wildly inaccurate spending requirement is not being challenged.
• Borrowing this year to come in at £126bn, down from Nov forecast of £127bn Borrowing for this year was set at £112Bn in his "Emergency Budget" less than two years ago.How can the man borrow so much more than he said he would and no-one comment on it?
From wryape:
You can encourage new business and enterprise all you like but they wont last long if there is no consumer demand. A supply led recovery is a strange concept. I dont see much yet that will stimulate demand.
Commenters were generally against the announcement on cigarette duty. From Armstrongx15:
37p on a packet of fags?Tobacco is going to become the number one smuggling good
People will be growing it in their bathtubs
parrotkeeper makes a point regarding alcohol and the NHS:
No extra duty on booze ??<Gob-smacked especially when they go on & on & on about booze related crime, costs to NHS etc
In response to pension changes: BigD shares what the changes will mean for their situation:
I'm 31 years old. I pay into a public sector pension scheme which is about to have contributions hiked. I was told that I could retire at 65 when I signed my contract. I was told it will go up in line with the state pension age which is currently forecast to be 68. Now I'm told the state pension age will go up automatically with the increase in life expectancy. When am I going to get my pension which I will be paying 5% of wages into? When I'm 70, 75, 80, 90? What a con! And pensioners today who had a job for life, bought cheap houses which are now worth a fortune, will get the largest increase ever in the state pension this year, have experienced no cuts whatsoever and who a large proportion earn more than me! I'm paying for pensioners to live a Life of Reilly, when I get there I'll get nothing like what pensioners today get. This country is a joke! Thanks Osborne and Cameron!
LouisLou comments:
the way we're going with this lot in charge life expectancy will start to fall....is there a contingency that state pension age will drop as life expectancy falls as we're all crushed and the health service that used to make us better is no more?
--
Did the Budget go too fast for you? You need Katie Allen's round-up of key points from the statement, here.
You can read all the budget documents on the Treasury's website.
And here's the Red Book, the key document with the charts explaining what everything costs (pdf).
Smallprint Alert: Under the headline "simplification" in the Red Book, there are figures showing how much the chancellor will raise from freezing age-related allowances. Osborne said in his speech that he wanted to make taxation for pensioners simpler. But it's also a substantial money-raiser - and by 2014-15 it will raise more than any other measure in the budget. In 2014-15 it will raise £670m and by 2016-17 it will raise £1.250bn. AS
Here is some reaction to the budget that has already come in.
From Brendan Barber, the TUC general secretary
We needed a budget that looked to the future and made jobs – particularly for young people – the national priority. Instead we have got a budget for the rich by the rich.One minute the chancellor said he found tax avoidance morally repugnant, the next he rewarded it by cutting income tax for the richest one per cent – with precious little relief for hard-pressed families on ordinary incomes. Treasury figures show that those on low and middle incomes will do worse than those higher up the income scale.
This looks like a budget made to keep the coalition together rather than one made for the good of the country.
From Simon Walker, director general of the Institute of Directors
While any tax reduction is welcome, the chancellor has not done enough to free business from the burdens and barriers that are holding economic growth back. Businesses dearly want the opportunity to invest, create and build, but George Osborne must go much further if he wants to fire up the engines of the economy. There was a bold move on corporation tax, but in the bigger picture this is still not far enough or fast enough."
From Christina Samson from UK Uncut
The tax threshold for low earners will be raised but at the same time the tax rate for the rich will be cut, the anti-avoidance rules are so weak they are just PR fluff and the changes in stamp duty may be unenforceable. So let's not be fooled into thinking that George Osborne is Robin Hood. He is blatantly the Sheriff of Nottingham.
From Andrew Harrop, the Fabian Society general secretary
This is a nothing more than a budget of reheated Thatcherism.
The chancellor has unveiled a £5,000 Easter present for anyone earning a quarter of a million pounds, while keeping quiet about his real-terms cuts to tax credits and the minimum wage which are so vital for low-wage earners.
Britain is becoming a more unequal country under Mr. Osborne.
From Andy Atkins, executive director of Friends of the Earth
This Budget sticks two fingers up at David Cameron's promise to build a clean future – and gives a massive thumbs down to new jobs and cutting our reliance on expensive gas and oil.
Safeguarding our environment and growing a strong economy go hand in hand – but the Chancellor has fired the starting pistol for more roads, airports and gas power that will keep the UK hooked on costly fossil fuels for decades to come.
Business leaders are sick of the Chancellor's Jekyll and Hyde routine on developing a low carbon economy – and other countries are leaving us trailing.
From Nick Pearce, director of the IPPR thinktank
Closing the loop hole for foreign buyers using companies to purchase homes is a welcome move, but [Osborne] should have gone further and introduced a mansion tax. Stamp duty at 7% on £2 million mansions will help but more action is needed to prevent the super-rich from using the London housing market as a 'global reserve currency' and to tax housing wealth, not just transactions.
The child benefit 'cliff edge' move is simply tinkering at the edges. The chancellor should have gone back to the drawing board. It would have been better and bolder to invest in universal childcare by freezing child benefit for 10 years.
From Peter Rollings, chief executive of estate agent Marsh and Parsons
Not only will [the stamp duty increase] disproportionately target London, where house prices are in a league of their own, it risks killing the goose that lays the golden egg. With the property market still far from healthy, we need to see the government supporting activity at all levels, rather adding yet another tax burden.
From Professor Stephen Glaister, director of the RAC Foundation, said: "The Chancellor's decision to go ahead with the summer rise in fuel duty is as unsurprising as it will be disappointing to 34 million drivers, especially when the Chancellor acknowledges there is likely to be a further spike in oil prices.
Here's the HMRC report on the impact of the 50p top rate of tax (pdf).
Here's a key extract from the summary. You'll see how tentative they are abou their findings.
The uncertainty regarding the extent to which the unwinding of this forestalled income depressed incomes in 2010-11 makes isolating the true underlying behavioural response to the additional rate challenging. A number of approaches were considered but the most statistically robust model has much in common with the approach contained in the Mirrlees review, which examined responses to tax rates changes in the 1970s and 1980s.
The modelling suggests the underlying behavioural response was greater than estimated previously in Budget 2009 and in March Budget 2010, decreasing the pre-behavioural yield by at least 83 per cent. This result is also consistent with that contained in the Mirrlees review, and suggests the additional rate is a highly distortionary form of taxation.
Although there is uncertainty around these estimates, sensitivity testing demonstrates that is difficult to construct a plausible outcome consistent with a yield estimate as high as those original forecasts. The conclusion that can be drawn from the Self Assessment data is therefore that the underlying yield from the additional rate is much lower than originally forecast (yielding around £1 billion or less), and that it is quite possible that it could be negative.
The Treasury has released data showing the impact of today's Budget on households. It shows that in 2014-15 the richest 20% will have felt the largest total impact of the tax, tax credit and benefit changes made by the chancellor. But the poorest fifth of families will suffer nearly as much.
According to the Treasury, the graph shows that "the top quintile continues to make the greatest contribution towards reducing the deficit as a per cent of their income and benefits in kind from public services."
But while those richest 20% will pay more through a higher tax take (or so the Treasury estimates), those less well off will suffer through lower tax credits and benefits.
These are the people that Chris Johnes, director of Oxfam's UK poverty programme, describes today as Britain's "squashed bottom", adding:
It is a farce to call this a 'Robin Hood' Budget when it has failed to support the poorest people in society and those who have lost their jobs.
Johnes added that the proposal to cut £10bn from welfare payment would be "catastrophic" for working families on low incomes. GW
The Red Book has details of how the much-anticipated Tycoon Tax could develop. From April 2013, the Government will introduce a new cap on income tax reliefs for those on higher incomes.
As Paul Belsman, RSM Tenon's head of tax explains, this means that for anyone seeking to claim more than £50,000 of relief, a cap will be set at 25% of earnings of income.
Belsman says we should look to America's Alternative Minimum Tax (AMT) for evidence of how this could snare less wealthy people in the years ahead:
Over time fiscal drag and the failure to index allowances has widened the scope of the AMT. It started off with the aim of getting a small number of taxpayers – 154 in total - with incomes over $200,000 paying no tax in 1969. By 1997, 605,000 taxpayers paid the AMT, and by 2008 3.9m paid the AMT.
Where the Tycoon Tax ends up, if it is introduced, is anyone's guess but the journey is definitely going to be interesting!
The full text of Ed Miliband's response is now on the Labour party's website. From what I heard, it went down well.
Photograph: PA
Here are some extracts.
The chancellor spoke for an hour but one of his phrases was missing. There was one thing he didn't say: today marks the end of 'we are all in it together' ...
A year ago the chancellor said in his Budget speech, 'Now would not be the right time to remove the 50p tax rate when we are asking others in our society on much lower incomes to make sacrifices.' That is exactly what he has done: tax credits cut, child benefit taken away, fuel duty rising - and what has he chosen to make his priorities? For Britain's millionaires, a massive income tax cut each and every year ..
How can the priority for our country be an income tax cut for the richest 1% at a time when the squeezed middle are facing rising petrol prices, higher energy bills and tax credits and child benefit being cut? Think of what you could have done with the money ...
Every time in the future you try to justify an unfair decision by saying 'Times are tough', we will remind you that you are a man who chose to spend hundreds of millions of pounds on those who need it least ...
Only the Lib Dems could be dumb enough to think George Osborne's Budget is a Robin Hood Budget - Calamity Clegg strikes again.
Miliband also had fun asking cabinet ministers sitting on the government front bench to say how many of them would benefit from the abolition of the 50p rate. (Cabinet ministers earn less than £150,000, where the 50p rate cuts in, but some of them have wealthy spouses and other family income.) He invited them to nod if the answer was yes.
Just nod if you're going to benefit from it, or shake your head if you're not. Come on, we've got plenty of time.
Smallprint Alert: In his budget speech Osborne said this in relation to alcohol duty.
Today I have no further changes to make to the duty rates set out by my predecessor.
Tom Stainer from the Campaign for Real Ale has been in touch to say that that does not tell the full story.
No change" on beer duty still means that duty will increase by 2% plus inflation due to the "duty escalator" which again will see around 10p added to the cost of a pint in a pub.
This is at a time when despite the UK accounting for just 15 per cent of beer consumption in Europe, drinkers in the UK pay around 40 per cent of beer duty in Europe.
Photograph: Dominic Lipinski/PA
Ed Balls, the shadow chancellor, has also been reading the HMRC report on the 50p rate. (See 2.30pm.) Here's what he told the BBC. I've taken the quotes from PoliticsHome.
It's really important to be absolutely clear what the government is doing here – what they are doing, and the document confirms – they are cutting the taxes for 300,000 top-rate taxpayers. And it confirms the cost of that next year will be £3bn – they're giving £10,000 to every top-rate taxpayer.
They are gambling that if they give £10,000 to the richest people who currently pay tax, they'll somehow be able to recoup £2.9bn from people who currently aren't paying tax because they're offshore or avoiding tax.
The problem is there's no certainty they'll get that money. The actual tax cut to existing taxpayers is six times what they're raising on stamp duty and tax avoidance. Will they get this money in? Well the IFS [Institute for Fiscal Studies] said just a few weeks ago that this Budget is too soon to form a robust judgement. Even the OBR [Office for Budget Responsibility] says this is highly uncertain.
Balls has taken the £3bn figure from p51 of the HMRC report. That's what cutting the 50p top rate would cost without making allowance for what HMRC call "behavioural impact", which refers to their calculation that the Treasury would lost £2.9bn from the £3bn the 50p rate could have raised because taxpayers would have taken avoidance measures.
Paul Johnson, director of the Institute for Fiscal Studies, has just told Sky that George Osborne's budget figures do add up - but only if he really gets as much from his crackdown on tax avoidance as he says he will, and only if scrapping the 50p rate really costs just £100m. He sounded slightly sceptical on both points.
Earlier we posted one of the charts showing the distributional impact of the changes in the budget. If you want to read more on this, look at Annex B of the Red Book (pdf), starting on page 89.
These charts take into account the impact of all the changes introduced by the government, not just today's changes.
As Ed Balls pointed out on the BBC earlier, these figures do not include the impact of the abolition of the 50p top rate of tax. That's because "the behavioural response is estimated to reduce the theoretical yield by around 97%", the document shows.
The most embarrassing chart for the government is chart B.2. It shows that those in the bottom three deciles - the poorest 30% - lose more, as a proportion of their income, than the richest 10% from the government's changes to tax, tax credits and benefits. And they do far worse than people in the second highest decile - the top 60 to 80% - who have done best of all. AS
Smallprint Alert: The Treasury is tightning up various VAT loopholes, in a move that will impact, among others, self-employed hairdressers.
Section 2.179 of its Budget Policy decisions, called "VAT: correcting anomalies and closing loopholes", states:
VAT will also apply, to the extent that it does not already do so, to the sale of hot food, cold food consumed on the supplier's premises, sports drinks and holiday caravans, and to the rental of hairdressers' chairs. This will have effect from 1 October 2012.
The issue of hairdressers' chair rental came before the High Court a few years ago - details here GW.
The Office for Budget Responsibility has just held its press conference following the budget statement.
OBR chairman Robert Chote has described today's measures as "broadly neutral", and warned that weak consumer spending will continue to drag on the UK economy until 2014 (remember, the OBR has trimmed 0.1 percentage point off its growth forecast for 2013, to 2.0%).
Chote also revealed that the OBR now expects general government employment to fall by 730,000 between start 2011 and early 2017. That is an extra 20,000 more job cuts than it predicted last November.
Our colleague Katie Allen attended the briefing, and reports that the OBR said it was "too early" to make assumptions about behavioural responses to the cut in the 50p tax rate to 45p. Chote made it clear that the OBR isn't going to commit itself on this issue today.
Chote says hard to estimate with confidence how high income individualsare going to respond to such tax changes #OBRbriefing #budget2012
— Katie Allen (@KatieAllenGdn) March 21, 2012
Chote was also asked whether the UK had reached the point where higher taxes were counter-productive and would bring in less revenue (a theory promoted by economist Arthur Laffer). He responded that "we are strolling across the summit of the Laffer curve".
Channel 4 News's Faisal Islam helpfully tweeted a picture of this moment:
Here is Robert chote: alongside "the Laffer Curve upon which we are strolling" twitter.com/faisalislam/st…
— Faisal Islam (@faisalislam) March 21, 2012
The OBR press conference finished with its panel saying they hope the next one, to be held after the next Autumn Statement, is "more exciting". Fingers crossed.... GW
Some praise for the chancellor's budget, from the Centre for Economics and Business Research.
The think tank has welcomed the changes to planning reform, corporation tax, and the abolition of the 50p tax, saying:
Cebr has sometimes criticised George Osborne for being too political and not doing enough for the economy. But this Budget is one of the best ever for UK GDP growth.
However, CEBR CEO Douglas McWilliams also suggested that the OBR's growth forecasts may be too optimistic, saying:
In the medium term the UK has to cope with the pressures of being an uncompetitive medium sized economy linked in trade with some of the slowest growing economies in the world. The OBR forecasts that UK growth will magic its way up to 3% by 2014. This is well beyond most expectations and it is worth pointing out that the GDP growth forecast they made for 2012 for last year's budget was 2.5%.
Today, it expects growth of just 0.8%. GW
In a Smallprint Alert at 1.58pm I pointed out that pensioners are some of the biggest losers in this budget. Ros Altmann, the director general of Saga, has now put out this statement about it.
This is an outrageous assault on decent middle-class pensioners.This Budget contains an enormous stealth tax for older people. Over the next five years, pensioners with an income of between £10,000 and £24,000 will be paying an extra £3 billion in tax while richer pensioners are left unaffected.
There is nothing in this Budget for savers, there is nothing to improve the annuity market, nothing to appease the damage of quantitative easing and nothing to support ISA changes and shelter older people's money in cash. This budget is terrible news for pensioners.
And this is from Joanne Segars, the chief executive of the National Association of Pension Funds
It is pensioners who are the biggest losers in today's Budget. Over the course of this parliament pensioners stand to lose over £2bn in age-related tax allowance. This will come as a blow to millions of pensioners who have paid in to the tax system throughout their working lives.
Pensioners with modest amounts of pension saving stand to be the biggest losers.
The Telegraph website is leading its budget coverage on this. Osborne may be getting worried.
Here are some highlights from the Guardian's budget coverage.
• Larry Elliott says it's a shocking budget.
• The verdict from the Comment is free panel.
• Julia Kollewe rounds up reaction to the budget from interest groups.
And you can find all our coverage here.
Smallprint Alert: The Charities Aid Foundation is saying that philanthropists could be deterred from making big donations to charity under today's budget proposals.
Under changes to tax relief announced by the Chancellor, those wanting to make major lump sum donations could be hit by lower tax relief on donations of more than £200,000.
Following the announcement, the Charities Aid Foundation (CAF) has called for urgent talks with the Treasury to ensure caps on tax relief announced in the budget do not strangle major donations by wealthy philanthropists.
It looks as if George Osborne's decision to freeze allowance for pensioners (see 4.10pm) is going to dominate the headlines tomorrow. This is one of the few big money items in the budget - it is going to raise more than £1bn a year by 2015-16 - but you would not have guessed from the way Osborne talked about it in his speech. This is what he actually said.
We should also simplify the age related allowances – which the Office of Tax Simplification have recently highlighted as a particularly complicated feature of the tax system.
The NAO points out that many pensioners don't understand them.
These allowances require around 150,000 pensioners to fill in self-assessment forms, and as we have real increases in the personal allowances, their value is already being eroded away.
So over time we will simplify the tax system for pensioners by doing away with the complexity of the additional age-related allowances for anyone reaching the age of 65 on or after 6th April 2013 and I will freeze the cash value of the allowance for existing pensioners until it aligns with the personal allowance.
In other words, he was presenting a tax raid as an attempt to spare pensioners from some unnecessary paperwork. This is precisely the kind of lack of candour for which Gordon Brown became famous. AS
Here's our story on the tax raid on pensioners - already dubbed the "granny tax" in the lobby.
Smallprint Alert. This one's from the Spectator's Fraser Nelson.
Debt as % of GDP more than Labour plans (attached) but lower in cash terms due to £23bn Royal Mail pension tweak twitpic.com/8ze0aw
— Fraser Nelson (@frasernelson) March 21, 2012
The Resolution Foundation has published a very good analysis of the budget which you can read in full here (pdf).
This grap shows the impact of changes to the personal tax allowance, and here's the key paragraph explaining the changes:
The further increase to the personal tax allowance to £9,205 in April 2013 will benefit all basic rate tax payers by on average £220 a year, worth £170 after inflation. Our first priority to target gains more directly on low to middle income households would have been to reverse £1.6bn of cuts to working tax credits about to hit this April. But instead, the personal allowance measure has at least been targeted on basic rate tax payers with gains to higher rate taxpayers restricted to make it less regressive and less expensive than otherwise would have been the case. In cash terms the increase on average benefits those in income deciles 7, 8 & 9 most and of the overall cost 70% of the benefit goes to the top half of the income distribution (see chart below). So while the impact is still regressive overall, it is more progressive than this year's increase to the personal allowance which fully benefits basic and higher rate tax payers.
When George Osborne announced his plan to cut child benefit for high earners, he said that one of the advantages of his plan was its simplicity.
Now it has become a muddle. Instead of being linked to the point at which you pay the higher rate of tax, Osborne has created two new thresholds: £50,000, where the child benefit cut will kick in, and £60,000, beyond which families will not be eligible for any child benefit at all. Between those two points, child benefit will be cut according to a sliding scale.
This is what Ed Balls had to say about it.
The odd thing is he [George Osborne] claims to be simplifying the tax system for pensioners, which is really about raising revenue, while being willing to spend a substantial amount of money trying to deal with the hole he is in on child benefit which you can only describe as a massive further tax complication.
I am very unconvinced [about] this child benefit change which has been cobbled together. It looks to me like one of those tax changes which are invented by the prime minister's office and imposed on the chancellor rather late. A good chancellor and a Treasury would not have gone along with it.
First of all, it is hugely complicated and I don't see how it can be delivered. Secondly, he is still saying that a family with one earner, where mum or dad looks after the kids, on £50,000 will lose all their child benefit. Whereas a two earner family on £99,000 will keep all their child benefit. So the fundamental anomaly and unfairness exists. Pensioners will think why does he think he wants to solve the child beneft problem for families on £40,000 and £50,000 while being willing to do a tax grab on pensioners on much lower incomes.
Here's some more reaction to the budget.
From Ken Livingstone
George Osborne's Tory budget a bad for London and dream come true for Tory Mayor Boris Johnson. After years of campaigning for a tax cut for the super-rich at the expense of ordinary Londoners Boris Johnson has finally got his way.
The winners from today's budget are the super-rich and their champion Tory Boris Johnson, the losers are the majority of Londoners.
From John Cridland, director general of the CBI
Family budgets have been under great pressure, and by putting more money in the pockets of ordinary people, the chancellor has provided a much-needed confidence boost.With many calls on the chancellor to spend money he didn't have, the best news for businesses is that he stuck to his guns and delivered a fiscally-neutral programme.
From Geraldine Bedell, editor of Gransnet
The biggest tax rise on pensioners in recent memory is already being dubbed by some as the Granny poll tax. The changes are set to cost over 350,000 pensioners £285 a year. People who have worked hard all their lives are now being targeted while at the same time seeing headlines of tax cuts for millionaires.
The chancellor is in danger encouraging a new era of grey activism.
From Patrick Nolan, chief economist of Reform, the centre-right thinktank
On tax the chancellor brought forward the increase in the personal allowance. This is expensive and does little for "fairness." (Reform estimated that only £1 in £14 of an increase in the personal allowance to £10,000 goes to people below this level.) This poor targeting creates economic as well as fiscal costs – with this policy providing no incentive to work harder or grow the tax base. Indeed, by making tax avoidance more attractive to middle income families this policy may shrink the tax base.
There is a stronger case for cutting the 50p rate. Yet while the tax system would clearly be better without the 50p rate this was not the biggest challenge facing the tax system. It was probably not as damaging to entrepreneurship and enterprise as policies such as restricting visas for skilled migrants from outside the EU or clawing back personal allowances and pension tax relief. Further, by combining the cut to the 50p tax rate with the introduction of measures like a higher stamp duty land tax rate and a cap on overall tax reliefs, the overall tax system has become more hostile. A small problem has been replaced with a bigger one.
From Ian Brinkley, director at The Work Foundation
This was the budget that could have done much more to set out a growth strategy. There were some welcome hints of what could have been – measures that support key industries such as life sciences and the digital sector, help create a modern infrastructure and boost the science base.
However these tentative measures were overshadowed by more traditional cuts in corporation tax and more Enterprise Zones. Not surprising, this Budget does little to alter long-term prospects for the UK economy.
From Gillian Guy, chief executive at national charity Citizens Advice
Raising the personal tax allowance is an empty gesture to struggling families on low wages. Poorer working families who get housing and council tax benefits will not get all of the money in their pocket, because as their income goes up, their benefits will go down.
From Sarah Woolnough, director of policy at the charity Cancer Research UK
Today's announcement on tobacco duty is welcome news. The cost of tobacco is a major factor in helping encourage smokers to quit and keeping the price high - increasing the duty by 5% above inflation - helps reflect the devastating cost of smoking.
From Stephen Joseph, chief executive of the Campaign for Better Transport
The extra money for rail schemes is welcome, but the chancellor's continued support for toll roads and planning deregulation will lead to precisely the 'car-dominated concrete grids' that the prime minister denounced on Monday. Road schemes, such as the Bexhill Hastings link Road approved today, will simply generate traffic. This budget was meant to set Britain on the road to recovery, but the concrete and congestion on offer from the chancellor will do nothing to solve the real problems in the economy.
Smallprint Alert: The Open Europe thinktank has been in touch to point out that the budget documents show that Britain's net contribution to the EU was £9.2bn in 2010-11, not £8.1bn as estimated last autumn. And it says that over four years Britain's contribution will be £33.1bn, not £31.3bn.
It is deeply concerning that the government managed to grossly underestimate its net contribution to the EU by a massive £1.8bn, especially given that taxpayers already put in an unacceptably high amount to a flawed and wasteful spending scheme. It's particularly bad as UK taxpayers seem to have received back far less of their money from Brussels than expected. The EU budget needs to be cut and spent far better.
The EU budget is riddled with perverse incentives as it forces the UK government to spend even more cash in order to unlock the funds that it does get back. Whichever way you look at it, UK taxpayers are losing out.
George Osborne will face the music next week over the flood of leaks that preceded today's statement.
The Treasury Select Committee has just announced that it will hold five sessions next week into Budget 2012, with the chancellor expected on Tuesday afternoon.
One of its tasks will be to compare the content of the budget with the various media reports of the past few days, to decide whether details of the budget were leaked, or whether the nation's journalists merely took some 'educated guesses'.
As one committee insider explained:
There was very little in the budget that surprised me, because I'd read the newspapers...The chairman [Andrew Tyrie] feels very firmly that these details should be announced to parliament first.
A year ago, the TSC warned that it "deprecate both leaks, and any advance briefing". Osborne may have some explaining to do. GW
Photograph: Peter Macdiarmid/Getty Images
Nick Clegg has put out a statement about the budget. Here it is in full.
As Liberal Democrats, our clear priority has been to bring about tax cuts to millions of ordinary hard working families.We said it, we promised it, today we've done it.
There are many winners and indeed losers in any budget.
So who are the losers in the budget? The millionaires who weren't paying their fair share.
The winners are over 20m basic rate taxpayers who will be £220 better off because of what we have just announced in the Budget today.
This is a budget every liberal can be proud of.
We're proud of the fact that we have delivered the largest increase in the Personal Allowance ever.
We are proud of the fact we have halved the tax bill for people working on the minimum wage.
We are very proud that we are taking over 2m people out of paying income tax altogether.
We have delivered from the front page of our manifesto to the pay-packets of millions of ordinary working people.
Fitch has become the first credit rating agency to comment on today's budget.
The good news is that Fitch (which lowered the UK's outlook to 'negative' last week), has not changed its assessment that Britain merits an AAA rating. The less-good news is that Fitch still reckons that the triple-A rating is "vulnerable to adverse shocks".
Fitch said:
The 2012 UK budget and the latest OBR economic and fiscal outlook confirm the agency's expectation that the UK government remains committed to the deficit-reduction strategy set out in previous budgets and the 2011 Autumn Statement.Fitch expects gross debt to peak at over 90% of GDP in 2014-15 before gradually declining. Retaining the 'AAA' status is conditional on debt stabilising by the middle of the decade and declining in the foreseeable future to below 90%.
Here's a link to the statement. GW.
Wondering how the budget affected you? Our colleagues on the Money desk have created this online calculator, which should indicate whether you are likely to be better or worse off in the next tax year.
Fitch's announcement that the Budget has not changed its view of the UK rather sums up the City's reaction. With the FTSE 100 closing just 0.01% higher, and the pound now trading around its opening level of $1.5956, the financial markets have given George Osborne's Big Speech a half-hearted shrug.
That was always likely, in truth, given the chancellor's commitment to delivering a fiscally neutral budget. The main priority is clearly to cling onto the AAA rating, so Fitch's comments should please the Treasury
Osborne also has the luxury of announcing economic growth projections that were barely changed from last November. That kind of stability should be welcomed. But behind today's calm, there is still concern in the City that the eurozone crisis could flare up again in the months ahead. If so, Osborne's forecasts may again look too optimistic by the autumn. GW
Remember the fuss about the 75p pension increase, more than a decade ago? It was actually quite reasonable – an indexed increase when inflation was very low – but the pensioner lobby are particularly vocal and powerful and Tony Blair ended up having to apologise to them at Labour conference for having the temerity to not be more generous to them. I'm not sure whether George Osborne will end up apologising for the "granny tax" (see 4.26pm), but the row about this measure may dominate the headlines for the next 12 hours or so.
If it does, it will obscure some of the other aspects of the budget. Earlier I identified three budget battlegrounds. Here's my analysis of how they look now.
1. The Tories v the Lib Dems. In the past we've had coalition budgets. But this time the two coalition partners negotiated in public and we've got something that feels very much like a double-headed measure: a Liberal Democrat tax allowance increase bolted onto the Tory abolition of the 50p top rate of tax. I've no doubt at all that Osborne is pleased about being able to take 2m people out of tax, but Nick Clegg has successfully branded this as a Lib Dem policy. Will it do his party any good at the local elections? Possibly not. But for a minor party in a coaltion, it's a result.
2. The rich v the poor. Osborne now always feels the need to be able to present his budget measures as progressive. Today he wasn't very convincing when he did so - it's very hard to believe that the 50p top rate of tax raised quite as little as he said - but at least the Treasury now produces a distributional analysis which allows arguments about the impact of these measures to get underway. The poor will fare very badly this year, but largely as a result of measures in the pipeline before Osborne stood up today. The tax allowance increase will increase millions of people on low income. But, as the Resolution Foundation has already established (see 4.33pm), those on above-average incomes will benefit more.
3. The coalition v Labour. Labour are hammering the line that this is a budget for the rich and if this sticks - which it may well do - the coalition is in trouble. But at this stage it's probably too early to tell how the public will reaction. Gordon Brown's decision to cut the 10p rate of tax ended up doing him enormous political damage, yet I don't remember many people predicting that the evening after he made his statement.
For all that, it's probably important to point out that the key thing about this budget is that it does not change a great deal. The tax allowance increase and the corporation tax cut are the only big number items in the Red Book (if you accept Osborne's claim that abolishing the 50p rate will not cost much) and even the "Granny Tax" only starts to raise more than £1bn after the general election. Osborne has already taken his most important strategic decisions, relating to the spending cuts. At one point in his speech he said that at the next spending round he could have to cut another £10bn from welfare. If you want a really big budget story, wait unitl he announces the details of that.
On that cheery note, we're off. Thanks for all the comments. AS