George Osbourne’s budget on a budget
There is a busy political and business landscape currently, so a bit more to review today.
George Osbourne yesterday delivered a message with plenty of material evidence to support the base aims of his budget, pointing out Greece as a prime example of what happens when you spend and borrow too much. The overall figures can be summarised thus: the plan is to raise £47.2bn through increases in tax and also £34.9bn through savings from cuts to welfare over the course of the budget. I commented yesterday that the solely Conservative budget would be a pure delivery of their core manifesto and this was pretty close to the mark.
The detail from yesterday’s announcements include planning to save about £12bn in the annual welfare spending. This is a pretty big figure, both in terms of absolute number and the percentage it represents of the non-pension welfare pot – 11%. There has been a real focus to respond to interests of significant businesses producing tax receipts (à la HSBC, who vocalised a consideration to leave our shores) with a cut in corporation tax to 18% by 2020. Also, the banks would receive relief on a type of levy that is in place on their assets, instead moving to a surcharge on profits. On the back of this news, banks’ share prices saw a rise.
Much has been made of a rise in the minimum wage proposed for the over 25s. Osbourne’s words were ‘Britain deserves a pay rise and Britain is getting a pay rise’. There has already been much debate about what this will mean for workers and, critically, whether this is actually representative of a living wage. I suspect this debate is far from concluded.
Elsewhere in the news, China has seen a rebound of their stocks (around 6%) as their securities regulator banned shareholders with large stakes in listed firms from selling. The stock markets have lost more than 25% of their value in the last three weeks and for some, this is a greater fear than the impact of Greece due to the size of its market and impact.
Lastly, the news today includes Australian employment figures, which have enjoyed a significant improvement in the full time employed segment. Greek unemployment rate is due today and the UK Interest Rate and Asset Purchase (QE) decision. The UK data is not forecast for any changes.