Budget 2015 – Economic overview

The economy – an end to austerity in 2019….?

Britain is getting “out of the red and into the black”, per Chancellor Osborne, going from “austerity to prosperity”.

Based on figures provided by the independent Office for Budget Responsibility, the public finances are in better shape than expected, based on previous growth and borrowing forecasts.

UK (Gross Domestic Product) growth forecasts are revised up for the current year to 2.5% with similar rates of growth expected until the end of the forecast period in 2019, three times that of the Eurozone.

Employment has risen to the highest rate in history with 1,000 jobs created every day, although the nature of these jobs wasn’t revealed. Unemployment is set to fall to 5.3% this year, giving the UK the highest employment rates in the world.

Public sector net borrowing for the current year is down to £90.2bn, lower than the £91.3 forecast; this is expected to fall to £12.8bn in 2017/18 then turn to a surplus of £5.2bn the following year.

Public sector net debt as a share of net income is due to peak in 2014/15 at 80.4% before falling to 71.6% in 2019/20, again, lower than the 2014 Autumn Statement forecast.

In a reversal from a few years ago when taxpayers bailed out the banks, a ‘windfall’ has now been created from the sale of bank shares and mortgage debt, with Lloyds and Northern Rock being singled out respectively.  Chancellor Osborne stressed that this money would go towards paying down the national debt which will come as a shock to most people as we were expecting some major giveaways in view of the election looming.

In order to meet his debt targets, an extra £30bn the Chancellor has to find an extra £30bn which he did through tax crackdowns, government department savings and welfare savings.

Inflation was revised down to 0.2%, reflecting falling oil and food prices although the 2% inflation target remains as a long term goal. The rules on farmers’ averaging of profits for tax purposes are to change, recognising the fluctuations in income due to weather uncertainty, etc..