The economy is growing faster than previously thought
Economic growth estimates for 2014 were upgraded from 1.8 per cent year ago and 2.4 per cent just in December to a 2.7 per cent growth in GDP, a revision described as the biggest between budgets for at least 30 years.
Looking further ahead, the Office for Budget Responsibility (OBR) predicts the GDP will grow by 2.2 per cent in 2015, 2.6 per cent in 2017 and 2.5 per cent in 2018. The OBR also predicts that the UK’s deficit will become 6.6 per cent of GDP in 2014-15, down from 6.8 per cent and that the UK will be “deficit free” in 2018-19. Meanwhile, The Bank of England’s remit to keep inflation steady at 2 per cent has also been renewed.
Such upward revisions could stimulate recovery in consumer confidence. Last month, researchers GfK found UK consumer sentiment in February matched January’s level, which was the highest in more than six years, partly driven by increasing confidence in the general economic situation.
Another move which could provide consumers with more confidence to spend was Osborne’s announcement that the level at which workers start paying income tax will be raised to £10,500. Elsewhere, the higher rate (40p) tax threshold will rise to £41,865 next month and by a further 1 per cent next year – which will see people on what Osborne described as “middle incomes” paying less income tax, giving them more confidence to part with their cash.
Big data is a big deal for the Government
The Chancellor used his budget speech to announce the foundation of the Alan Turing Big Data Institute, a centre for big data research.
He said the Institute will help ensure Britain “heads the way in big data and algorithm research”, although he did not go into further detail.
Regardless, the news will be welcomed by marketers to help make sense of the growing amount of information across various touch points they have on their customers, rivals and the wider industry. The McKinsey Global Institute warned last year that too many companies are missing out on gaining a competitive advantage because of a lack of data management expertise.
ISBA director of media and advertising, Bob Wootton, says: “This is an excellent policy and we fully support the government in providing British business and advertisers another competitive advantage. This will provide advertisers with more accurate information, which will also benefit consumers.”
Today’s announcement follows Prime Minister David Cameron’s speech at the CeBIT technology trade show in Germany earlier this month, where he said he wanted to “turn the internet of things from a slogan to a fact” by making an additional £45m of funding to help research in this area.
The grey pound becomes more valuable
Big reforms to pension tax rules were pledged by Osborne today.
He detailed legislation that will remove all remaining tax restrictions on how pensioners have access to their pension pots, giving them “complete freedom” to withdraw their funds with no limits and without the need to buy an annuity. The taxable part of the pension pot will now be charged at the normal income tax rate, down from 55 per cent and pensioners will now be able to take a lump sum of up to £30,000.
On the marketing front, expect communications around the new system the Government is creating together with consumer groups and the pensions industry dubbed “right to advice”. The Government is funding this scheme with a £20m investment and it will see a new guarantee forced by law for all pensioners to receive free, impartial, face-to-face advice on how to get the most from their pensions.
The Chancellor said the idea behind the pension reforms, which also includes the launch of a new NS&I pensioner bond, was to “trust the people” and acknowledge the older generation are clearly wise enough to make their own decisions about their money.
The older generation is often overlooked by marketers who favour the mass-market 18-34 category in their media buys. But these reforms could mean pensioners now have even more disposable income – not to mention time to spend it – than their younger counterparts.
Savings overhaul could spark ISA marketing bonanza
Osborne announced dramatic changes to the popular tax-free ISA savings scheme, designed to increase the “simplicity, flexibility and generosity” of the accounts. More than 24 million people in the UK have an ISA account, many of them the older generation the Tories seemed to favour in this year’s Budget.
The reforms include merging the cash and stocks ISAs to create a single new ISA and an increase of the annual limit to £15,000. The annual limit increase and “simpler” accounts are likely to become key messages of banks and building societies’ marketing activity as they look to savings to encourage customers to take up more products or lure in new consumers from rivals.
Elsewhere on the savings front, Osborne announced he is abolishing the 10 per cent tax rate for savings accounts worth under £5,000.
“You have earned it, you have saved it, this Government is on your side,” he insisted. And will likely repeat.
Cider, beer and spirits brands cheered by duty announcements
Alcohol duty will continue to rise in line with inflation, with the exception of Scotch whisky, British spirits and ordinary cider on which duty has been frozen. Diageo country director Andrew Cowan said the announcement provided a “huge boost” which will benefit the spirits industry at home and also help it “fly the flag for British business across the world”.
The move is likely to be welcomed by cider producers in the West Country whose production levels have suffered at the hands of the recent floods. Mintel predicts the UK cider category will reach sales of £3.7bn over the next four years, driven partly by previous duty increases but also rising brand awareness, helped by major campaigns from the likes of Stella Cidre, Magners, Bullmers, Carling British Cider and Carlsberg’s Somersby.
Beer duty will be cut by a further 1p – a very small price decrease appreciated but unlikely to add any particular fizz to alcohol marketers’ campaigns and communications.
Brigid Simmonds, chief executive of the British Beer and Pub Association, said of the changes: “It will protect over 7,000 jobs over two years, mostly jobs of younger people in Britain’s pubs…I hope this becomes a trend in future budgets for this British-made, lower-strength drink.”
Elsewhere duty on bingo will be cut to 10 per cent, while the duty on controversial fixed odds betting terminals will increase to 25 per cent.
Tobacco duty will rise to 2 per cent above inflation and this escalator will be extended beyond the next general election.
Airline and travel companies to boast cheaper flights to exotic locations
Osborne today announced a major reform to air passenger duty. All long haul flights will soon carry the same tax rate as flights to the US, a move Osborne said will encourage more tourism from countries such as China and India.
The move will also benefit UK tourists planning trips to far flung destinations, which the airline and holiday industry is likely to seize upon in marketing activity to encourage people to book up exotic holidays.
But something unlikely to lift the hearts of some of the UK’s bigger brands was the announcement that the corporate private jet tax break will be eliminated. Marketing Week hears Tesco has four of them…
Brands given more tax-free leeway to invest for the long-term
A big tax break for businesses was announced today, with the annual investment allowance set to double to £500,000 and the scheme extended to 2015.
From next month, Osborne said 99.8 per cent of the businesses in the UK will receive this allowance which means they will pay no up-front tax when they “invest in the future”.
The increase will cost the UK £2bn in the short term, but may see more businesses acquiring companies and making investments in infrastructure and technology to help safeguard their long term futures.