UK BUDGET PREVIEW: Osborne Seen Addressing Banking Levy And Non-Doms
LONDON (Alliance News) – The UK Budget to be outlined by Chancellor George Osborne on Wednesday is set to include a pledge to re-examine the banking levy, a crackdown on non-domiciles, and a relaxation of Sunday trading hours, along with controversial plans to slash around GBP12 billion from the UK’s welfare budget and a populist move to raise the inheritance tax threshold.
The Budget is the first since the Conservatives won a outright majority in the May general election, putting the party in sole power for the first time since the Labour government, led by Tony Blair, came to power in 1997.
The British Bankers’ Association, the banking industry trade body, has called on Osborne to give them a break on the bank levy in the Budget, arguing this tax has already resulted in UK banking assets shrinking by 13%. According to a report in the Financial Times, there is growing optimism in the banking world that Osborne will offer the sector an olive branch, potentially in the form of appointing an external body to undertake a review of the levy.
In its Budget submission, the BBA said the levy is “causing damage” and called for the rate to be capped, along with a so-called “sunset clause” to phase out the levy after a certain period.
Osborne raised the bank levy by 50% prior to the election, the last of series of nine increases to the levy since it was first introduced in 2011, and he changed it from a temporary to a permanent tax.
The FT also said bankers believe the Treasury is considering plans to shift how the levy is calculated from the global balance sheets of UK banks to their domestic activities only. That would make it less punitive for banks such as HSBC Holdings PLC and Standard Chartered PLC, which have significant operations outside of the UK.
Osborne also is planning another tightening of allowances for non-domiciled UK residents, whose status allows them to pay no tax on earnings made outside the country. As part of a GBP5 billion crackdown on tax evasion and aggressive tax avoidance, Osborne will increase the annual payments made by non-doms and will tackle abuses of the allowance.
The Chancellor also is planning in the Budget to remove the remaining restrictions on Sunday trading, according to press reports, a move likely to please major retailers but anger corner shop proprietors and religious activists in Britain. The budget will include a consultation on giving councils and mayors the freedom to relax rules completely at a local level. Existing laws prevent larger stores from opening for more than six hours on a Sunday.
The most prominent component, from a political and social perspective, of the Budget is set to be plans to cut GBP12 billion from the UK’s welfare budget, with Osborne saying earlier this week that he has identified how these cuts will be made. The bulk of the savings plans will be outlined on Wednesday, but it is already known that he intends to reduce the benefit cap and will remove subsidies for social housing.
Osborne also has said he has no plans in the works to raise the minimum wage, instead arguing that tax cuts represent the best way to boost low pay. Some Conservatives have called on him to require or encourage companies to pay more than the GBP6.50 minimum wage, but Osborne has rejected those calls. He said earnings are already rising in the UK and said the minimum rate is already set for a rise in October.
Elsewhere, Osborne is set to confirm the end of inheritance tax on homes worth up to GBP1 million, increasing the threshold at which the tax is applied from the current GBP650,000 after April 2017. The move was included in the Conservative Party’s election manifesto and Prime Minister David Cameron joined Osborne in a piece written for The Times in which they said people who worked to buy their homes should be able to pass them on to relatives.