Budget 2015: The expert reaction

GEORGE Osborne claimed triumphantly that the gender pay gap is the lowest it has ever been, but after more than 40 years of equal pay legislation women still have a very different experience of the labour market to men.

Women in Scotland working full-time still earn 12 per cent less than men working full-time, while this figure leaps to 32 per cent for women working part-time.

But we also need to look behind the headline pay gap figure at the type of work women are doing, and that is mainly in undervalued, low-paid jobs.

Women comprise two-thirds of public-sector workers, which means the gendered impact of public-sector job losses, recruitment freezes and reduction in hours has been felt most by the women working in that sector.

This Budget is more bad news for women whose lives have already been devastated by the Coalition Government’s austerity programme, and offers little hope for a future where women’s work is valued and counted.

John Dickie, director, Child Poverty Action Group Scotland

THE Budget announced little detail in the way of new changes to the benefits and tax credits that low-income households rely on. Whether they are in or out of work, there was nothing to make up for the income they have already lost as a result of cuts announced in this Chancellor’s previous Budgets.

But aside from the richest 10 per cent, who have taken a hit, the cumulative impact of the Coalition’s Budgets on the incomes of UK households is largely regressive, with those towards the poorest end of the income distribution taking the greatest hit.“

Savings” from benefit cuts have, as analysis by the London School of Economics has highlighted, been used to pay for tax breaks for the better-off rather than to reduce the deficit. And slashing social security simply increases the costs for society – analysis for CPAG found that child poverty already costs the UK £29 billion a year.

Finally, the increases in personal tax allowance have been of little benefit as most low-earners have an income well below the point at which they become liable for income tax, while others keep just 15p in every £1 gained because in-work benefits are withdrawn.

Alex Russell, professor of petroleum accounting, Aberdeen Business School and Peter Strachan, professor of energy policy, Robert Gordon University

THE North Sea oil industry has been a pillar of strength to the UK economy over the past 45 years. It has contributed more than £300 billion to the exchequer’s coffers, and more than that to the UK’s GDP performance. It has sustained a related UK-wide workforce of around 450,000 employees. In its role as collector of taxes, we can add to its credit another £500bn or so of gathered taxes such as fuel duty that have helped limit the extent of the UK’s ever-increasing national debt.

This performance has been all the more remarkable given the regulatory and fiscal regime with which it has had to cope. Prior to the latest Budget, exploration and production oil companies were paying a marginal rate of taxation of 60 per cent or a nightmarish rate of 80 per cent. How could this be fair or sensible, given that other industries struggle to cope with a corporation tax rate of 20 per cent?

Little wonder then that expectations were high that in this Budget the so-called supplementary tax would be at worst cut back to where it was in 2011, when the current Chancellor increased it by 12 per cent on grounds of “fairness” as oil prices had doubled since the time the supplementary charge had been increased to 20 per cent by the previous Labour administration. And that has happened. Basically George Osborne had to reduce it, given the groundswell of opinion from all quarters on the merits of the reduction.

Unfortunately, since 2011, operating costs in the UK oil sector have surged, and at the current price of oil there seems little to enthuse about with this reduction. Why did the Chancellor not remove the supplementary charge completely, thereby removing all doubt about his sincerity in wishing to maintain a prosperous North Sea oil industry for the next 30 or 40 years? The suggestion is not that the supplementary charge should be removed permanently but rather that once oil prices recovered then the situation could be reviewed.

The other measure put forward by the Chancellor to reduce the rate of petroleum revenue tax (PRT) from 50 per cent to 35 per cent is mere tinkering at the edges. The revenue raised from PRT has been diminishing and after this reduction those companies that pay PRT will still bear an unnecessarily high marginal rate of 67.5 per cent. One of the main reasons for the relatively good performance in the non-oil sector is the fact that over the years oil revenue has been invested in the South of England. Is it not payback time?

In our view while the changes proposed in the Budget are an improvement, this Chancellor has missed the opportunity of being decisive in reducing the fiscal burden on the North Sea oil industry.

David Frost, chief executive, Scotch Whisky Association

THE Chancellor’s landmark decision to reduce duty on Scotch by two per cent is a historic decision and only the fourth time whisky duty has been cut in a century.

The announcement marks the first cut in spirits duty in almost 20 years. It will be toasted across the whisky industry and by consumers who are getting a fairer deal on tax when they have a drink of Scotch.

The move is a major boost to our industry as we look to grow again in the UK, and sends out an equally important signal on fair taxation to our export markets.

The industry is raising a glass to George Osborne and his Treasury team, as well as to all those who have supported our campaign for a two per cent duty cut for spirit drinks, in line with the policy adopted for beer in the last two Budgets.

As a result of the cut, the duty burden on a 70cl bottle of Scotch at the average price of £12.90 has been reduced by 16p to £7.74. VAT is charged twice on Scotch – on duty and on the final selling price. The total VAT on a bottle of Scotch is now £2.15.

The total tax burden now stands at £9.89, or 77 per cent of the average price of a bottle, down from 78 per cent.

The Chancellor’s recognition of Scotch whisky as one of the UK’s biggest exports has also been welcomed.

The cut is a show of support for a major UK industry and its supply chain, which is responsible for more than 40,000 jobs. It will help underpin investment across the sector, which will boost public finances.David Boyd, partner, Scott-MoncrieffTHE Chancellor’s move to cut corporation tax to 20 per cent should help to make industry here more competitive compared to some countries in Europe where the rate is in excess of 30 per cent. Indeed, the UK now has one of the lowest rates of corporation tax in the whole of the European Union, and it is also the lowest in the G20 alongside Russia and Saudi Arabia.

Corporation tax has gradually been coming down during the life of this Government, which inherited a rate of 28 per cent in 2010, so a reduction of 1 per cent will not really be that noticeable for many companies – many smaller companies are already paying the 20 per cent rate.

That being said, any reduction in tax on business has to be a good thing, though it is impossible to calculate how it will affect the economy or if it will lead to an increase in the number of jobs in the UK. Reducing corporation tax certainly won’t do any harm, which is as much as can be said about it.

One very interesting plan in the Budget is the introduction of new “digital tax accounts” by 2020. The effects that will have on small businesses who will move from annual tax returns to online real-time accounts will be fascinating to see. It is supposed to simplify things, but I am not so sure it will.

When self-assessment came in during the 1990s, it was hailed as a simplification of the tax system, but since then it has become exponentially more complex and is far more unwieldy than it has ever been.

At this stage, I don’t know if the new system will work or not, but we have seen these sort of things before and they have not had the sort of impact they were supposed to have, so at this stage I would say don’t hold your breath if you’re waiting to see a better outcome.

Martin Crewe, director, Barnardo's Scotland

“MEH” is a phrase my children like to use for anything that is of little interest or unimpressive. Wikipedia describes the term as a verbal shrug of the shoulders … and this really was a “meh “budget with no real interest for the children and families who are struggling to get by in Scotland.

George Osborne may assert households are £900 better off than in 2010 but this simply doesn’t square with how many are feeling. It is also based on the hypothetical average family and there is no such thing. At Barnardo’s Scotland our focus is on the most disadvantaged children and families and they have often experienced increasing adversity over the past five years.

The two key issues that affect children and young people in Scotland in today’s Budget are decisions on welfare spending and decisions to spend additional money in England in devolved areas such as health or education, which will lead to an increase in the overall Scottish budget (known as Barnett consequentials).

Therefore the Chancellor’s decision not to reduce welfare spending as drastically as he had planned is to be welcomed. However, there are many aspects to welfare spending and one of the biggest issues faced by the children and families we work with is benefit sanctions. This is where the Job Centre stops benefits payments because they judge claimants have not fulfilled their work-search requirements. The latest figures show that UK-wide almost one fifth (18.4 per cent) of claimants in 2013/14 were sanctioned, and the estimated amount of money lost to claimants across the UK through JSA sanctions in 2013/14 is in the region of £328 million. We need the welfare bill to fall because people move into decently paid long-term jobs, not through sanctioning some of the most vulnerable.

Another important benefits issue is ensuring people get all they are entitled to. The Chancellor announced yet another crackdown on tax avoidance and evasion. Where is the equivalent commitment to ensure benefits uptake by the most vulnerable?

We warmly welcome a major expansion of mental health services for children. As a UK-wide commitment this should result in extra spending available to the Scottish Government by virtue of the Barnett Consequentials. At Barnardo’s Scotland We would like to see money invested in effective early intervention and support for children and families who are in need, but not in crisis. We know that investing in supporting families early is always more cost-effective than waiting for problems to get really serious. The Scottish Government should therefore use this money to make good on its publicly stated commitment to increase preventive spending, to the long term benefit of vulnerable children and families in Scotland. That would mean more investment in things like parenting support, addressing mental wellbeing issues and tackling substance misuse.

The 20p uplift in minimum wage is also a step in the right direction. The Chancellor has confidently predicted reduced unemployment for the future but we know that in-work poverty is an increasing problem. At a time when there is an increasing recognition of the desirability of paying a ‘living wage’ we are still struggling to bring the statutory minimum wage up to a level that is compatible with a life free from poverty.

However, a couple of small positives cannot shift the feeling this is a budget to which most people will respond with a shrug of the shoulders, and return to the daily grind.