What do we already know about today's Budget?

Today's Budget is one of the most leaky ever. Here is a breakdown of the measures already trailed.

You would be forgiven for thinking that George Osborne's Budget speech today is simply a formality, given the amount of material that has already been leaked. Here is a summary of what has already been trailed, in what must be one of the most leaked Budgets ever.

50p tax

It looks nearly certain that the Chancellor will scrap the top rate of tax, which applies to those earning over £150,000. Rather than abolishing it outright, it will be reduced from 50p in the pound to 45p. This lays the groundwork for getting rid of it entirely next year, and reverting to 40p as the highest rate of tax.

Tax avoidance clampdown

To offset this tax cut for the rich, Osborne has promised to "come down like a ton of bricks" on those who avoid stamp duty. The annual charge on non-domiciled residents will also be upped from £30,000 to £50,000. It's worth noting that the higher rate was floated last year but did not materialise. In today's FT, Martin Taylor says we should not expect this tax clampdown to work.

Stamp duty

In a small victory for the Lib Dems, who have long been lobbying for some form of property tax, stamp duty is to be raised from 5 per cent to 7 per cent on properties worth more than £2m. This measure should raise £2.2bn to help fund the increase in the income tax threshold.

Raising the income tax threshold

Osborne will accelerate plans to raise the income tax threshold to £10,000. This move, heavily touted by the Liberal Democrats, will apply to all 23 million basic tax-rate payers and many higher earners, too. Osborne is likely to announce a large short-term increase, with plans to reach the £10,000 mark by April 2014, long before it was scheduled.

Regional pay deals

Public sector workers in poorer areas of the country will be paid lower salaries - in some cases, as early as next month. Osborne will argue that the public sector should be more like the private sector and reflect local economies, but critics say it will accentuate the economic divide between north and south. It was unclear whether the new rates would apply only to new staff or to existing staff as well. The Treasury insisted that no current employee would suffer a pay cut - rather, rates would be adjusted over time.

Sunday trading hours

The Chancellor will force through emergency legislation lifting the six-hour limit on opening hours for larger stores, in a bid to boost the economy. The restrictions will be lifted on eight weekends over the summer, to coincide with the Olympics and Paralympics. This could open the door for the restrictions to be scrapped altogether.

Tax transparency

Taxpayers will be given a breakdown of where their tax money is going, from the NHS, to defence, to unemployment benefits.

TV tax breaks

The government will launch a consultation on tax breaks for high-budget British television dramas, such as the wildly successful Downton Abbey.

Royal Mail privatisation

In a radical move, the government will take on all the assets and liabilities of the Royal Mail's pension fund, taking responsibility for paying postal workers' pensions for decades to come. This will open the door for the privatisation of the postal service: the pension fund, which has a shortfall of £9.5m, would make it impossible to attract a private sector buyer.

Planning laws to be relaxed

Osborne has said he is "deeply frustrated" with the slowness of the planning process, and will announce new legislation to make it easier to build in the countryside. This will clear the way for more homes and infrastructure to be built - but it may further undermine the coalition's claim to be "the greenest government ever". Regulations protecting wildlife are expected to be scrapped as part of this drive.

International aid

It looks as if the commitment to spend 0.7 per cent of GDP on international aid will be maintained.

 

Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

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What is the EU customs union and will Brexit make us leave?

International trade secretary Liam Fox's job makes more sense if we leave the customs union. 

Brexiteers and Remoaners alike have spent the winter months talking of leaving the "customs union", and how this should be weighed up against the benefits of controlling immigration. But what does it actually mean, and how is it different from the EU single market?

Imagine a medieval town, with a busy marketplace where traders are buying and selling wares. Now imagine that the town is also protected by a city wall, with guards ready to slap charges on any outside traders who want to come in. That's how the customs union works.  

In essence, a customs union is an agreement between countries not to impose tariffs on imports from within the club, and at the same time impose common tariffs on goods coming in from outsiders. In other words, the countries decide to trade collectively with each other, and bargain collectively with everyone else. 

The EU isn't the only customs union, or even the first in Europe. In the 19th century, German-speaking states organised the Zollverein, or German Customs Union, which in turn paved the way for the unification of Germany. Other customs unions today include the Eurasian Economic Union of central Asian states and Russia. The EU also has a customs union with Turkey.

What is special about the EU customs union is the level of co-operation, with member states sharing commercial policies, and the size. So how would leaving it affect the UK post-Brexit?

The EU customs union in practice

The EU, acting on behalf of the UK and other member states, has negotiated trade deals with countries around the world which take years to complete. The EU is still mired in talks to try to pull off the controversial Transatlantic Trade and Investment Partnership (TTIP) with the US, and a similar EU-Japan trade deal. These two deals alone would cover a third of all EU trade.

The point of these deals is to make it easier for the EU's exporters to sell abroad, keep imports relatively cheap and at the same time protect the member states' own businesses and consumers as much as possible. 

The rules of the customs union require member states to let the EU negotiate on their behalf, rather than trying to cut their own deals. In theory, if the UK walks away from the customs union, we walk away from all these trade deals, but we also get a chance to strike our own. 

What are the UK's options?

The UK could perhaps come to an agreement with the EU where it continues to remain inside the customs union. But some analysts believe that door has already shut. 

One of Theresa May’s first acts as Prime Minister was to appoint Liam Fox, the Brexiteer, as the secretary of state for international trade. Why would she appoint him, so the logic goes, if there were no international trade deals to talk about? And Fox can only do this if the UK is outside the customs union. 

(Conversely, former Lib Dem leader Nick Clegg argues May will realise the customs union is too valuable and Fox will be gone within two years).

Fox has himself said the UK should leave the customs union but later seemed to backtrack, saying it is "important to have continuity in trade".

If the UK does leave the customs union, it will have the freedom to negotiate, but will it fare better or worse than the EU bloc?

On the one hand, the UK, as a single voice, can make speedy decisions, whereas the EU has a lengthy consultative process (the Belgian region of Wallonia recently blocked the entire EU-Canada trade deal). Incoming US President Donald Trump has already said he will try to come to a deal quickly

On the other, the UK economy is far smaller, and trade negotiators may discover they have far less leverage acting alone. 

Unintended consequences

There is also the question of the UK’s membership of the World Trade Organisation, which is currently governed by its membership of the customs union. According to the Institute for Government: “Many countries will want to be clear about the UK’s membership of the WTO before they open negotiations.”

And then there is the question of policing trade outside of the customs union. For example, if it was significantly cheaper to import goods from China into Ireland, a customs union member, than Northern Ireland, a smuggling network might emerge.

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.