This week George Osborne opened his red briefcase and revealed the latest figures from the Office for Budget Responsibility. The Chancellor appeared somewhat less optimistic towards the UK economy than he was four months ago, but at least Mr. Osborne sweetened – and possibly distracted – his audience with the introduction of a new ‘sugar tax’. Elsewhere in the news, Apple and Google meet as UK challenger banks receive a welcome boost.
With the UK economy stuttering ahead of the Brexit vote in June, as well as warnings of a “dangerous cocktail” of economic risks globally, it is no surprise to hear that David Cameron ordered a non-controversial Budget. And that, by and large, is what the Chancellor delivered. Despite the deteriorating economic outlook – and breaking two of his three fiscal promises – George Osborne still managed to coat the negative sentiment with a headline-seeking £520 million sugar tax, much to chef Jamie Oliver’s delight. Businesses also received a welcome boost – providing they’re not one of the multinational tax avoiders – as the Chancellor promised to not only cut corporation tax to 17% by April 2020, but also to permanently increase the small business rate relief from £6,000 to £15,000.
All in all it was a ‘safety-first’ Budget, designed to have minimal political risk attached. Duty on fuel, beer, cider and whisky were all frozen once again, while details of a ‘Lifetime ISA’ for the under-40s were unveiled. The new ISA is designed to encourage people to start saving as early on as possible; for each £4 saved, the government will add £1 more. The personal tax allowance was also increased to £11,500, slightly higher than forecast.
But these were the only real sweeteners in a Budget that was plagued by the gloomy economic outlook. The UK economy is slowing as gross domestic product growth was revised down to 2 per cent from 2.4 per cent this year, with 2016 growth also lowered. The economy is also smaller than the government had previously forecast and Osborne’s debt-cutting promise was another one broken. His third pledge of running a surplus by 2020 therefore looks increasingly unlikely.
Fed Trumps
Divisive billionaire Donald Trump continues to hog the headlines on the other side of the Atlantic as he gains momentum in the presidential primaries. But in the financial pages, the Federal Reserve (Fed) took centre stage. “Lower for longer” was the overall message as the US central bank acknowledged it was at the mercy of uncontrollable global events. With growth forecasts reduced, the Fed’s top priority now is to ensure that embryonic economic improvement isn’t wasted.
This was the reason behind the Fed’s decision to halve its expectation of four rate increases to just two quarter-point hikes this year.
Challenge accepted
It was good news for ‘challenger’ banks this week as the big boys struggled to regain lost ground. The latest round of annual results revealed that big doesn’t always mean better, with minnows Aldermore and Shawbrook reporting 88 and 63% jumps in pre-tax profits, respectively. City regulators have been busy too, handing out 15 licences to newcomers with more in the pipeline.
Apple also hit the headlines this week as it agreed to partner with Google. The deal involves Apple’s iCloud system and comes as a blow to Amazon. For Google, however, which has notoriously lagged behind both Amazon and Microsoft’s Azure, it will be seen as a breath of fresh air as well as denoting a rare tie up between the great rivals.
And finally…
Luna, a German Shepherd puppy, has returned home five weeks after she fell off her owner’s boat while fishing in the Pacific Ocean. Overcoming some ruff seas, the clever pup doggy-paddled two miles to an island where she reportedly feasted on various exotic treats including crabs. Miraculously, the canine castaway was alive and well, albeit a little thin from her adventures, when she was collared by the US Navy five weeks later.
