2014 Budget: Comment and Analysis

When reporters outside of Downing Street asked George Osborne whether there would be any ‘surprises’ in the 2014 budget, they probably got a little more than they bargained for. With sweeping changes to the pension system, ISA regulation, measures to further prevent tax avoidance, the introduction of a new £1 coin and many other additions, it is no wonder that the budget has been described as revolutionary.

The measures in the budget to help out businesses and families are significant. The pledge by the Chancellor to increase the investment allowance from £250,000 to £500,000 will undoubtedly be of benefit to businesses. Furthermore, abolishing income tax for those earning under £10,500, as well as continuing with increases to the personal tax allowance from £6,500 to £10,000 is a huge tax cut that will benefit millions of people.

While the Chancellor made many radical changes in the budget, the changes made to pensions were almost certainly the centrepiece. Reactions to the changes have been incredibly positive, even from those who wouldn’t support the government necessarily. The previous system effectively forced savers to buy pension annuities before actually retiring, and in doing so, dictated spending for pensioners each year. By abolishing this practice, pensioners will benefit from increased spending and saving power, as well as an increase in economic freedom.

This will have a positive effect on the way people save in the future, which would explain why the amount saved in an ISA account is being increased by the Chancellor to accommodate £15,000 instead of £4,000. This is certainly a step forward as, yet again, it gives savers more freedom to decide how and what exactly they want to do with their money.

The 2014 budget has laid out not only a clear economic message from the Government, but also a political and ideological one. George Osborne has signalled that he is serious about cutting back expenditure, and the programme of cuts is one that he has pledged to continue until the deficit has been reduced. In doing so, and with the latest budget, he has indicated a move towards giving consumers more choice in what is done with their own savings.

Pensioners will benefit from increased spending and saving power, as well as an increase in economic freedom

This budget has highlighted, more than any other time previously, a lack of vision and clarity in economic policy by the Labour party. The response to the budget from Ed Miliband, whilst claiming that living standards have fallen under the coalition government, was noticeably deficient of any alternative economic narrative or constructive criticism of the budget presented to the Commons. Indeed, one of the more memorable of criticisms on the pension reforms came from a Labour spokesperson on Newsnight, who proclaimed that ‘you can’t trust people to spend their own money.’

This budget, unsurprisingly, is a significant one. It now seems a strong possibility that the economy is entering a period of growth. It is impossible to ignore the fact that it will be one of the last budgets made before the election. George Osborne’s job of balancing politics with economics is one that has been successful in the 2014 budget. Regardless of whether voters are ‘wooed’ by the budget or not is beside the point. Political leaning aside, this budget will help the savers, the families and the businesses of this country in what will be, and has been, a financially difficult period.