Budget Comment: David Glen, PwC

A crowd pleaser or a prelude to an election victory?

PwC David GlenThere is no doubt that what George Osborne delivered was a pre-election Budget.  Full of quotable sound bites, references to what has been achieved over the last five years and a number of digs at the Opposition.

So Britain “is working again” and “walking tall”, growth is up, we have record numbers in work and the lowest level of inflation.  But what was in it for Scotland?

The £1.3bn package of measures announced for the oil and gas sector will certainly be most welcome in the North East, with substantial reductions in petroleum revenue tax from 50% to 35% and the supplementary charge from 30% to 20%, in conjunction with the new single investment allowance.

Ironically, the cause of the North Sea’s pain, i.e. the fall in oil prices (leading to lower energy costs for business and individuals), is actually what is stimulating the enhanced economic growth, leading to low inflation across the UK, driving down welfare costs and Government debt costs, giving George Osborne the opportunity for some “giveaways”.

Elsewhere in Scotland, the whisky industry will be raising a glass to the 2% cut in whisky duty.  The pub industry will also welcome this and the reduction of 1.2% off a pint but will consumers be just as happy? With the cut in duty equating to around 18p on a bottle of spirits, based on a £15 bottle, and about a penny off a pint, I suspect many won’t even notice.

While there have been giveaways, ultimately someone always has to pay and this time it’s the banks with their levy being increased to 0.21%, international businesses with the Diverted Profits Tax and wealthy investors with the reduction in the lifetime allowance for pensions from £1.25 to £1m, to name but a few.

There was much talk of the Northern Powerhouse, but seemingly that powerhouse does not stretch beyond Hadrian’s Wall as the Chancellor principally referenced the likes of the allocation of business rates increases to Greater Manchester Council. However, mention was made of implementing the city deal in Glasgow and opening negotiations in Aberdeen and Inverness; this will result in the UK and Scottish Governments working with these regions on a series of measures to boost economic growth.

The Chancellor also reaffirmed the UK Government’s commitment to the devolution process in Scotland, and we would expect the draft legislation to be enacted in the forthcoming Finance Bill later this month.

Pretty much all that had been rumoured to arise in the Budget did appear, including the abolition of the annual tax return.  We will need to study the detail for exactly how this will work.  Certainly for those with simple tax affairs of, say, employment income and some bank interest, this will now all be reported directly reported to HMRC by their employer and bank therefore there will be nothing more to be done.  How this will work for those with more complicated tax affairs, such as the self-employed, is less clear.

I would suggest that overall, this was a positive Budget for Scotland, however the really interesting Budget this year will be the one expected to be made in early June by whoever forms the new UK Government.

David A Glen is head of tax at PwC Scotland

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