The Impact of the Budget

On March 23rd 2011, the Chancellor George Osborne presented the Budget, which was designed to assist the UK economy, despite the fact that the 2011 growth forecast was downgraded from 2.1% to 1.7%. There was more bad news as the forecast for 2012 was also down from 2.6% to 2.5%. On a brighter note, inflation is set to remain between 4% and 5% in 2011, before falling to 2.5% in 2012.

In terms of borrowing, the forecast was for £146bn this year, which was £2.5bn lower than anticipated. Borrowing is predicted to fall to £122bn next year and drop to £29bn by 2015-16. The national debt forecast will be 60% of national income this year, rising to 71% in 2012 before falling to 69% by 2015.

In terms of the actual impact of the budget on the average UK citizen, there are some benefits, especially on the price of fuel. Fuel duty will be cut by 1p per litre and the planned inflation rise in fuel duty, due in April, will be delayed until 2012. The annual 1p above inflation "fuel escalator" rise will be scrapped until 2015 but VAT on fuel will not be reduced.

The cost of alcohol and tobacco generally rises after each budget and although this year there will be no additional changes to alcohol duty rates, the 2% above inflation rise in excise duties for wine, spirits and beer will go ahead. Tobacco duty rates will also go up by 2% above inflation and the duty regime is due to be reformed.

The Chancellor said, "This is not a tax-raising Budget, nor can we afford a give-away." The budget did not include a request for more taxes from the public or further spending cuts. Thankfully there were no personal tax increases. In fact, personal tax allowance is set to rise a further £630 to £8,105 in April 2012. The 50% top rate of tax will stay in place but a detailed review is planned to work out exactly how much it raises. There will also be consultation on the long-term plan to merge income tax and National Insurance.

There was more good news for the average citizen in these difficult times with the announcement that council tax will be frozen or reduced this year in every English council. Winter fuel payments will also fall.

The Budget also included a new scheme to help first-time buyers get on the property ladder and a series of initiatives to help businesses and young people looking for work.

Only time will tell if this Budget will have a positive impact on the economy and the day-to-day lives of people up and down the country.