BUDGET 2015: Osborne’s speech in full
Mr Deputy Speaker,
This is a Budget that puts security first.
It’s a Budget that recognises the hard work and sacrifice of the British people over the past 5 years and says: we will not put that at risk, we have a job to do and we’re here to get on with it.
This will be a Budget for working people.
A Budget that sets out a plan for Britain for the next 5 years to keep moving us from a low wage, high tax, high welfare economy; to the higher wage, lower tax, lower welfare country we intend to create.
This is the new settlement.
From a one nation government, this is a one nation Budget that takes the necessary steps and follows a sensible path for the benefit of the whole of the United Kingdom.
And this is a Budget that can only be delivered because the British people trusted us to finish the job.
Because they know that the only way to have a strong NHS, strong schools, and a strong defence is to build a strong economy – that’s how we were elected, and is exactly what we will do.
Mr Deputy Speaker,
The British economy I report on today is fundamentally stronger than it was five years ago.
We’re growing faster than any other major advanced economy.
Our businesses have created two million more jobs
Living standards are rising strongly.
Our long term economic plan is working.
But the greatest mistake this country could make would be to think all our problems are solved.
You only have to look at the crisis unfolding in Greece as I speak, to realise that if a country’s not in control of its borrowing, the borrowing takes control of the country.
Britain still spends too much, borrows too much, and our weak productivity shows we don’t train enough or build enough or invest enough.
This we are determined to change.
We will be bold in transforming education.
Bold in reforming welfare.
Bold in delivering infrastructure.
Bold in building the Northern Powerhouse.
We will be bold in backing the aspirations of working people.
This is a big Budget for a country with big ambitions.
It is a Budget that sets the way to secure Britain’s future.
Mr Deputy Speaker,
Let me turn to the latest forecasts from our independent Office for Budget Responsibility – and we thank Robert Chote and his colleagues for their hard work.
We now have Budgets that fit the economic forecasts, instead of economic forecasts that were fixed to fit the Budget.
At the March Budget it was thought that the British economy had grown by 2.6% last year. We now know it grew by 3%.
But the global economic risks are rising.
The US economy has slowed, so too has China.
And even before the Greek crisis intensified this week the forecasts for global growth had been revised down this year to 3.2%.
It is all the more reason to get our own house in order.
For 2015 the OBR forecast growth at 2.4%
That is faster than America, faster than Germany and twice as fast as France.
For the second year in a row, Britain is expected to have the strongest economic growth of any major advanced economy in the world.
In 2016 the OBR have growth unchanged at 2.3% – and it is then revised up to 2.4% in the following year; a level of strong, steady growth it predicts for the rest of the decade.
This growth is driven by stronger private consumption, and by stronger private investment too.
Indeed, business investment is now 31.9% higher than it was in 2010, and is revised up again this year.
Now we need to see investment at home matched by exports abroad.
Our decision to become a founder member of the new Asian Infrastructure Investment Bank is driven by our determination to connect Britain to the fastest growing parts of the world.
And our decision to seek reform to the EU is driven by our determination that this part of the world shall not price itself out of a prosperous future.
Mr Deputy Speaker,
Higher investment leads to more jobs, which brings me to the OBR forecasts for employment.
Over two million more people have the security of work as a result of this government’s long term economic plan.
The OBR forecast that under the current economic conditions, almost a million more jobs will be created over the next five years.
Our ambition is to go further, and create 2 million more jobs on the road to full employment. To help achieve that progressive goal, we set out today how we will make work pay.
Mr Deputy Speaker,
Jobs are not created by accident.
They are created when businesses have confidence – the confidence to invest, to grow and to hire.
Confidence that comes because Britain is getting its house in order.
So we seek to create a country that can truly pay its way.
The budget deficit is now less than half the 10% we inherited.
And economic security is returning
But all that progress is at risk if we do not finish the job
That means more than just eliminating the deficit, it means running a surplus to get our dangerously high levels of debt down.
That brings me to the first of the key judgements in this Budget: how fast do we cut the deficit?
And my answer is this: we should cut the deficit at the same pace as we did in the last parliament.
We shouldn’t go faster. We shouldn’t go slower.
At this pace the national debt is lower as a share of our national income in every future year than when I presented the Budget in March.
And it is achieved without a rollercoaster ride in public spending.
This is why:
First – our tax receipts are stronger than forecast, showing the recovery is firmly entrenched.
Second – as a strong majority government we’ve been able to get on with making extra savings in this financial year.
Third – we can make faster progress in returning our banks, including RBS, to where they belong – the private sector.
Indeed the sale of government assets this year will deliver the largest privatisation proceeds of all time, higher than the previous record in 1987.
Stronger tax receipts, more asset sales and a strong government that’s getting on with the job – we can achieve a smoother path to the same destination.
With a surplus a year later in 2019-20, but the national debt lower and that same surplus higher.
For this is a budget that puts economic security first.
Mr Deputy Speaker,
Many difficult but necessary decisions are required to save money and this will be done with moderation but determination.
This is a one nation Government that does the best thing for the economy and the right thing for the country.
This plan is reflected in the forecasts for debt and deficit produced today by the Office for Budget Responsibility.
The deficit was 10.2% of national income in 2010.
This year it is forecast to fall to 3.7% – one third of the deficit we inherited.
It then falls again to 2.2% in 2016-17, down to 1.2% in the year after that, and then to just 0.3% in 2018-19.
The following year, 2019-20 we move into a budget surplus at 0.4%, which is then maintained in the year after that at 0.5% of GDP.
In structural terms, the OBR judge that this will be the largest surplus in at least 40 years.
Britain back in the black, and in its strongest position for almost half a century.
This is, of course, all reflected in the amount of cash Britain has to borrow each year.
In 2010, Britain was borrowing a staggering and unsustainable £153.5 billion a year.
In March the OBR forecast we would borrow less than half that, or £75.3 billion, this year. In this Budget, they have revised borrowing down this year, to £69.5 billion.
Borrowing then falls to £43.1 billion next year, £24.3 billion in 2017/18 and down to just £6.4 billion the year after that.
In 2019-20 we move into a surplus higher than previously forecast of £10.0 billion which rises to £11.6 billion the year after that – Britain finally doing the responsible thing and raising more money than it spends.
Five years ago, we inherited a situation where our national debt as a share of our national income was soaring.
This year, that national debt share is falling.
Bringing to an end the longest continued rise in our national debt since the seventeenth century.
It’s falling now, and it continues to fall in every year of the forecast.
Down from 80.3% this year, to 79.1% next year, then down again to 77.2% in 2017-18, 74.7% the year after, and 71.5% the year after that – before falling again to 68.5% in 2020-21.
Britain has turned a corner.
Mr Deputy Speaker, having come this far, there can be no turning back.
We should aim for a new settlement across the political spectrum where it is accepted that:
without sound public finances there is no economic security for working people,
that those who suffer when governments run unsustainable deficits are not the richest but the poorest,
and therefore in normal economic times governments should run an overall budget surplus, so our country is better prepared for whatever storms lie ahead.
In short we should always fix the roof while the sun is shining.
Today I publish the new Fiscal Charter that commits our country to that path of budget responsibility.
While we move from deficit to surplus, this Charter commits us to keeping debt falling as a share of GDP each and every year– and to achieving that budget surplus by 2019-20.
Thereafter, governments will be required to maintain that surplus in normal times – in other words, when there isn’t a recession or a marked slowdown.
Only when the OBR judge that we have real GDP growth of less than 1% a year, as measured on a rolling four-quarter basis, will that surplus no longer be required.
The Chancellor of the day will have to set out their plan with clear targets to restore the nation’s finances to health – and this House of Commons will test the credibility of that plan and vote on those targets.
It is sensible, pragmatic and it keeps Britain secure.
We will put this new Fiscal Charter to a vote in this House this autumn.
Mr Deputy Speaker,
In order to meet this new Charter further difficult decisions need to be taken to live within our means.
We will take these decisions in a balanced and fair way.
I can confirm that the analysis produced today shows that the richest are paying a greater share of tax than they were at the start of the last parliament.
And more than that, we are continuing to devote a greater share of state support to the most vulnerable.
As I said they would – those with the broadest shoulders are bearing the greatest burden. For we are all in this together.
And, in the last fortnight we’ve seen independent statistics showing that since 2010, child poverty is down and so is inequality.
That comes on top of a record number of women in work, and the gender pay gap at an all-time low.
All good news which should be welcomed on all sides of the House.
Mr Deputy Speaker, the fiscal plan set out in this Budget requires around £37 billion of further consolidation over the Parliament.
Today I set out how we will find just under half of that – £17 billion.
We’ve found annual savings of £12 billion from welfare and £5 billion from tackling tax evasion, avoidance, planning and imbalances in the tax system.
The other half will largely come from government departments and will be set out at the Spending Review that the Chief Secretary and I will conduct this autumn.
However, no year will see cuts as deep as those required in 2011-12 and 2012-13.
Of course, I am conscious that a huge amount has already been done to increase efficiency across Whitehall – with administrative budgets down by over 40% in real terms.
But there’s still much more we can do.
There is also a simple trade-off between pay and jobs in many public services.
I know there has already been a period of restraint, but we said last autumn that we would need to find commensurate savings in this Parliament.
So to ensure we have public services we can afford, and protect more jobs, we will continue recent public sector pay awards with a rise of 1% per year for the next four years.
Mr Deputy Speaker,public spending should reflect public priorities – and we have to make choices.
Our priority is the National Health Service.
We will fund fully the plan the NHS has itself produced for its future – the Stevens Plan.
That plan requires very challenging efficiency savings across the health service – which must be found.
But it also requires additional government funding.
Our balanced approach means I can today confirm the NHS will receive – in addition to the £2 billion we’ve already provided this year – a further £8 billion.
That’s £10 billion more a year in real terms by 2020.
It’s proof that you can only have a strong 7-day NHS if you have a strong economy.
Mr Deputy Speaker, I’ve set out the difficult choices we’re going to face on government spending, and the priority we will accord to our national health service.
I turn now to combatting tax evasion, avoidance and aggressive tax planning.
In Budget after Budget, we have done more to combat this than any government before us.
We inherited a system where bankers boasted of paying lower tax rates than their cleaners, and some multinationals shifted all their profits offshore.
We’ve stopped these blatant abuses that were allowed to flourish, and many others.
But we promised the British people we would do more – and find a further £5 billion a year, and I can confirm we have done so.
We’re boosting HMRC’s capacity with three quarters of a billion pounds of investment to go after tax fraud, offshore trusts and the businesses of the hidden economy, tripling the number of wealthy evaders they pursue for prosecution – raising £7.2 billion in extra tax.
We’re going to change the law to stop the use of losses which abuse our controlled foreign companies regime, and make sure investment fund managers pay the full capital gains tax rate on their carried interest.
We’ll stop corporates artificially increasing the value of stock for tax purposes, and to focus the employment allowance on employment – we’re restricting it so that companies where the director is the sole employee will no longer be able to claim.
We’re consulting today on how to deal with the increasing abuse of the rules around disguised employment when working through a personal service company.
And we’re going to add tough new penalties to our General Anti-Abuse Rule, and name and shame serial users of failed tax avoidance schemes.
These people should have nowhere to hide.
Mr Deputy Speaker, the Non-Domicile tax status is a long standing feature of the UK tax system, in place since 1914, that plays an important role in allowing those from abroad to contribute to our economy, before returning to their permanent home – and many countries have some version of this tax status.
Simply abolishing it altogether, would, as Ed Balls correctly noted, probably cost the country money.
Many of these people make a considerable contribution to our public life and to tax revenues.
But there are some fundamental unfairnesses in the non-dom regime that I am putting a stop to today.
It is not fair that people who are born in the UK to parents who are domiciled here, can later in life claim to be non-doms and live here.
It is not fair that non-doms with residential property here in the UK can put it in an offshore company and avoid inheritance tax.
From now on they will pay the same tax as everyone else.
And most fundamentally, it is not fair that people live in this country for very long periods of their lives, benefit from our public services, and yet operate under different tax rules from everyone else.
Non-dom status was meant to be temporary, but it became permanent for some people. Not any longer.
I am today abolishing permanent non-dom tax status.
Anyone resident in the UK for more than 15 of the past 20 years will now pay full British taxes on all worldwide income and gains.
We will consult to get the detail right.
All these non-dom measures will come into effect in April 2017, and they will raise £1.5bn in extra tax for the Exchequer over this Parliament.
British people should pay British taxes in Britain – and now they will.
Mr Deputy Speaker, turning to corporate tax rules, we will also broaden the base for corporation tax by removing, for future transactions only, the annual deduction for acquired reputational value.
For big companies with profit over £20million a year, we will bring forward corporation tax payments dates – so tax is paid closer to the point at which profits are earned.
This is fair, it’s more in line with what we’re doing in personal tax and is what almost all other G7 nations do. Banks make a key contribution to our economy, but also need to make a fair contribution.
It’s important they help pay down the debts built up during the banking crisis, but equally important they go on creating jobs – not just in London, but Edinburgh, Leeds, Birmingham, Bournemouth and across the country.
The new remit I am issuing today for the Financial Policy Committee highlights the importance of productive investment, innovation and competition in finance.
Our bank levy was introduced to raise revenue and increase the stability of balance sheets, and it’s worked – but now it risks doing harm unless we change it.
So I will, over the next 6 years, gradually reduce the bank levy rate – and after that make sure it no longer applies to worldwide balance sheets.
But to maintain a fair contribution from the banks, I will introduce a new 8 percent surcharge on bank profits from the 1st January next year.
By getting this balance right, it means we’ll actually raise more from the banks this parliament, but at the same time make our country a more competitive place to do business.
We’ve taken action to make sure that consumers get a better deal from another important industry – insurance.
The cost of premiums are down for families.
And today we’re announcing a major review of the regulation of claims management companies and we’ll cap the charges they can apply to their customers.
Britain’s insurance premium tax is well below tax rates in many other countries.
I am therefore today raising insurance premium tax – which applies to only one fifth of all premiums – to 9.5%, effective from this November.
With these measures I am putting in place an approach for taxing banks and insurers over this Parliament which is sustainable, stable and fair.
Mr Deputy Speaker, in each year, we’ve been able to use money from the banking fines paid by those who represent the worst of British values to support those in uniform who demonstrate the best of British values.
Today we announce funding for the Defence Medical Welfare Service and the Royal Commonwealth Ex-Services League.
We’re supporting the incredibly courageous members of our Special Forces who are injured and, in the 75th Anniversary of the Victoria Cross and George Cross Association, quadrupling the annual annuity we pay to those who demonstrated the highest valour and who I had the honour of meeting yesterday.
In the week of the poignant anniversary of the 7/7 attacks, we should recognise too our victims of terrorism overseas have no permanent memorial.
We will now fund one, as well as a specific memorial to those murdered in Tunisia.
We’re committing £50 million to expand the number of cadet units in our state schools to 500, prioritising schools in less affluent areas.
And we’re going to support the Children’s Air Ambulance by funding an extra helicopter.
Mr Deputy Speaker, in every Budget I also find an opportunity to fund the commemoration of famous events from our history and the buildings that symbolise them.
This Budget is no exception.
The RAF’s Group Fighter Command Centre in West London was the place where the Battle of Britain was directed from – and it badly needs repair.
I want to thank the new Member, my Honourable Friend for Uxbridge, for bringing to my attention the dilapidated state of his campaign bunker.
Let its renovation stand as a monument to the heroes of the Battle of Britain and the days when aeroplanes flew freely over the skies of west London.
Mr Deputy Speaker, I turn now to the great economic challenge we face on productivity.
For this is the key to delivering the financial security families see when living standards rise.
And it will ensure Britain becomes what we want it to be – the most prosperous major economy in the world by the 2030s.
That is within the grasp of our generation, provided we take the big decisions.
On Friday we will set out our Plan for Productivity, to help realise this ambition.
And I want to thank my new Treasury colleague – Jim O’Neill – for his work as a world leading economist in putting it together.
Major British businesses led by Sir Charlie Mayfield, have told me they want to be part of the solution to this great challenge and we very much welcome that.
So let me today set out the key parts of that plan.
Four fifths of all journeys in this country are by road, yet we rank behind Puerto Rico and Namibia in the quality of our network.
In the last 25 years, France has built more than two and a half thousand miles of motorway – and we’ve built just 300.
In the last Parliament I increased road spending, even in difficult times, and set out a plan for £15bn of new roads for the rest of this decade.
But we need a long term solution if we’re going to fix Britain’s poor roads.
Vehicle Excise Duty was used to fund our roads, but not anymore.
And because so many new cars now fall into the low carbon emission bands, by 2017, over three quarters of new cars will pay no VED at all in the first year.
This isn’t sustainable and it isn’t fair.
If you can afford a brand new car, including some of the most expensive models available, you can pay no VED.
If you can only afford an older, second-hand car, you have to pay more tax.
So this is what we’ll do.
From 2017, for brand new cars only, we will introduce new VED bands.
The duty in the first year will be set according to emissions, like today, but updated for new technology.
Thereafter there will be three duty bands – zero emission, standard and premium.
For standard cars – that covers 95% of all cars sold in the UK – the charge will be £140 a year. That’s less than the average £166 that motorists pay today.
There will be no change to VED for existing cars – no one will pay more in tax than they do today for the car they already own.
In total we’ll only raise the same amount of revenue from VED in the future that we do today – but that revenue will be secure for the long term.
And I will return this tax to the use for which it was originally intended.
I am creating a new Roads Fund.
From the end of this decade, every single penny raised in Vehicle Excise Duty in England will go into that Fund to pay for the sustained investment our roads so badly need.
We’ll engage with the Devolved Administrations on how the money is allocated there.
Tax paid on people’s cars will be used to improve the roads they drive on.
It is a major reform to improve the infrastructure and productivity of our economy – and deliver a fairer tax system for the motorist.
We will consult on extending the deadline for new cars and motorbikes to have their first MOT test from 3 years to 4 years, which would save motorists over £100m a year.
I can also confirm that there will be no changes to the plans for fuel duty I set out in March – fuel duty will remain frozen this year.
Mr Deputy Speaker, productivity means building more roads, it also means giving people the skills they need to secure a better job.
It is to our national shame that we are almost the only advanced country in the world where the skills of our 16 – 24 year olds are no better than our 55-64 year olds.
The education reforms we started in the last parliament have begun to address this problem.
And we’re going further in this parliament by tackling the coasting schools that simply aren’t good enough.
We’ve already doubled the number of apprenticeships to 2 million – now we’re committed to 3 million more.
To fund those apprenticeships and make sure they’re of high quality, we have to confront this truth.
While many firms do a brilliant job training their workforces; there are too many large companies who leave the training to others and take a free ride on the system.
So we are going to take a radical, and frankly long overdue approach.
We are going to introduce an apprenticeship levy on all large firms,
Firms that offer apprenticeships can get more back than they put in.
Britain’s great businesses training up the next generation.
3 million more apprenticeships with the security that will bring.
The money will be directly controlled by employers and we’ll work with business on how to do this, it’s exactly the sort of bold step we need to take if Britain is going to raise its game.
Next we’ve got to secure the success of our university sector, which is one of the jewels in the crown of the British economy.
When we reformed student funding in the last Parliament we were told by those who so opportunistically opposed us that it would put people from low income backgrounds off from going to university.
Instead we now see a record number of these students applying and succeeding.
It is a triumph of progressive reform.
Now we are removing the artificial cap on student numbers so we don’t have to turn away people from our universities who want to go and have the right grades.
But we can’t afford to do this unless we tackle the cost of student maintenance grants – that is set to almost double to £3bn over this decade.
There’s also a basic unfairness of asking taxpayers to fund the grants of people who are likely to earn a lot more than them.
The government of 1997-2010 actually abolished these grants, before reintroducing them, and now they’ve become unaffordable.
If we don’t tackle this problem then our universities will become underfunded and our students won’t get places – and I’m not prepared to let that happen.
So, from the 2016-17 academic year we will replace maintenance grants with loans for new students – loans that only have to be paid back once they earn over £21,000 a year.
And to ensure university is affordable to all students from all backgrounds, we’ll increase the maintenance loan available to £8,200 – the highest amount of support ever provided.
To ensure our university system is sustainable, we’ll consult on freezing the loan repayment threshold for five years – and we’ll link the student fee cap to inflation for those institutions that can show they offer high-quality teaching.
And we’ll open the whole sector to new entrants who can deliver the highest standards.
It’s a major set of reforms to make sure Britain continues to have the best universities in the world. It is fair to students.
Fair to taxpayers.
And vital to secure our long term economic future
Mr Deputy Speaker, Britain’s weak productivity is also driven by the fact that too much of our economic strength is concentrated in this capital city.
This is unhealthy and unproductive, and we must achieve a better settlement for the future.
Not by pulling London down.
One of the first pieces of advice I received in the Treasury was to cancel the plan for the Crick Institute, Tate Modern extension and Crossrail – but I rejected that advice, because I’ve always believed it’s to our nation’s great advantage that we have one of the world’s great capitals.
Now we’re working with the Mayor on what this city will need in the future, with projects like Crossrail 2 and the exciting development of the Olympic village.
But what really drives this government, is building up other parts of our United Kingdom, as a balance to London’s strength.
For Scotland, we’re now delivering – as promised – major devolution of tax and welfare powers.
The Scottish Government will soon have to answer the question; “you’ve got the powers, when are you going to use them?”
In Wales, we are honouring our commitments to a funding floor and to more devolution there – and investing in important new infrastructure like the M4 and the Great Western Line.
And in Northern Ireland, we are working with all parties to deliver the ‘Stormont House Agreement’ and sustainable public finances there.
Devolution to the nations of the United Kingdom is well established.
In my view devolution within England has only just begun.
Today we go further in building the Northern Powerhouse.
I can today announce that I have reached agreement with the leaders of the 10 councils of Greater Manchester to devolve further powers to the city.
These include putting fire services under the control of the new Mayor, establishing a land commission in the city, and further collaboration on children’s services and employment programmes.
The historic devolution that we have agreed with Greater Manchester in return for a directly elected mayor is available to other cities who want to go down a similar path.
I can also tell the house we are working towards deals with the Sheffield and Liverpool City Regions and Leeds, West Yorkshire and partner authorities on far reaching devolution of power in return for the creation of directly elected mayors.
We’ve created Transport for the North – now I’m putting it on a statutory footing and I can announce £30 million of funding to this new body as it connects northern England together, with seamless oyster-style ticketing across the region.
Next, with my RHF the Business Secretary and MP for Bromsgrove – we’re pushing for more powers and responsibility to be devolved to the Midlands.
The massive £7.2 billion investment in transport in the South West is underway.
And in the first of our new county deals we’re making progress on a major plan to give Cornwall a greater say over local decisions.
We are, across England, launching a new round of Enterprise Zones for smaller towns, and to celebrate the Queen’s 90th birthday, a new set of prestigious Regius Professorships will be created in universities right across the country.
And to give more power to counties and to our new mayors, we are going to give them the power to set the Sunday trading hours in their areas.
Let’s invest across our country.
Let local people decide
Let’s put the power into the Northern Powerhouse.
Mr Deputy Speaker, another key to raising the productivity of our country is building more homes and creating a fairer property market.
This is a government that is unwavering in its support for home ownership.
That’s why we’re introducing the new Help to Buy ISA this autumn.
That’s why we’re giving housing association tenants the right to buy.
That’s why we will set out further planning reforms on Friday.
Today I set out three important changes that will address unfairness in our taxation of property, and put the security o