There was some good news for Scottish business in the Chancellor’s Budget. The most significant was his announcement of measures to boost investment in the North Sea oil industry. There will be new tax allowances, including a £3 billion new-field allowance for large and deep fields to open up west of Shetland. Mr Osborne added that the UK government planned to enter into contractual agreements on tax relief for North Sea decommissioning costs.
Then there was specific support from three new Scottish enterprise zones in Dundee, Irvine and Nigg, which will be able to offer improved capital allowances for businesses setting up in them. Dundee in particular will also benefit from Mr Osborne’s decision to give tax breaks to the computer games industry. The announcement represents a significant victory for the sector’s pressure group TIGA.
“This is a brilliant decision by the government and terrific news for the UK video games industry,” said Richard Wilson, TIGA chief executive. “Like a boxer knocked down by his opponent, we refused to accept defeat and kept getting back in the ring. This victory will benefit not just the UK games development and digital publishing sector but also the wider UK economy.”
Colin Anderson, managing director of the Dundee-based digital toy company Denki, said that games tax relief would “stimulate much needed investment and innovation in one of the UK's leading knowledge based industries. The leadership TIGA has demonstrated throughout this debate has played a decisive role in getting games tax relief on the political agenda and proposed into today's Budget. TIGA has shown once again that it delivers results for its members and for the wider games industry.”
Other key business reforms include a further cut in corporation tax, down to 24 per cent from next month with a reduction to 22 per cent by 2014. There will be a consultation on simplifying the tax system for small firms with a turnover of up to £77,000. The Chancellor also announced that the government was considering enterprise loans for young people to start their own business.
Mr Osborne said that the UK needed to be better connected in terms of its broadband infrastructure. Edinburgh, Cardiff, Belfast and London are among ten cities that will benefit from a £100m pot of Treasury cash to make them “super-connected” (100MB per second).
Edinburgh is expected to receive a share of between £8m and £11m – though, as some experts have pointed out, the government’s commitment is likely to be used as an incentive to speed up the roll-out of commercial services. The extra cash used to help connect those areas where commercial companies say it is too expensive for them to deliver their newest and fastest services.
The Scotch whisky industry will be relieved that it will not face another increase in duty. However, there is less good news for rural Scotland, which is already facing large fuel bills. The Chancellor announced that there would be no change to existing plans on fuel duty, but the fair fuel stabiliser means that rises in fuel duty above the rate of inflation will return only if price of oil falls below £45 ($70) a barrel. Vehicle excise duty will rise by inflation for car users but will be frozen for road hauliers.
Mr Osborne announced that growth for the UK economy had revised up to 0.8 per cent for this year. He then went on to make predictions for the future, claiming that the Office for Budget Responsibility believed that it would reach 3 per cent by 2015. That allowed him to argue that unemployment would peak at 1.67m this year.
On the tax system, he promised to simplify this to ensure that the poorest paid the least and the richest the most. He wanted to be seen as a reforming Chancellor, one who created a modern tax system fit for the modern world, one that was more competitive for business than any other country. With this in mind, he promised to increase research and development tax credits to ensure that this kind of work remained in the UK rather than moving abroad.
On personal and property taxes, the Chancellor described tax evasion and aggressive tax avoidance by some higher tax payers as “morally repugnant”. He said that a general tax avoidance rule to be introduced. He added that a major source of abuse was over stamp duty and introduced a new duty of 15 per cent for properties over £2m bought through companies and 7 per cent by those bought by individuals.
As expected, Mr Osborne confirmed that the 50p tax rate, which he said was the highest in the G20 and harmed the British economy, would be cut. He argued that it was only justified if it raised a substantial sum of money. Instead, he told MPs that a report by HM Revenue & Customs had claimed that it caused a massive distortion in the tax system, raising only a fraction of what had been. From next year, the top rate will be 45p.
If the Chancellor cut a tax for the rich, he also did so for the poor by raising the personal allowance, which he said was “the best way to get the lowest paid out of tax altogether”. So this year, people will be able to earn up to £8,105 before starting to pay tax, with this rising by a further £1,100 next April, up to £9,205. Mr Osborne claimed that 24m people earning less than £100,000 would be better off.
He concluded by claiming that the government had “not ducked the difficult choices – we’ve taken them head on. A competitive top rate of tax. More revenues from those best able to pay. Fewer reliefs. A tax cut for working people. Support for families. Low income earners taken out of tax altogether.
“No people will strive as the British will strive. No country will adapt as the British will adapt. No country will value those who work as we will value them. Together, the British people will share in the effort and share the rewards. This country borrowed its way into trouble. Now we’re going to earn our way out.”
Donate to us: support independent, intelligent, in-depth Scottish journalism from just 3p a day