Today the UK did something the US hasn't done in years: it disclosed its 2013 budget. Some of the details as per the BBC [4]:
- Income tax threshold to be raised to £10,000 by next year
- Public sector net debt will fall by 2017/18, the Office for Budget Responsibility forecasts
- Beer duty cut by 1p a pint
- Planned fuel duty rise scrapped
- The first £2,000 to be taken off all employers' National Insurance bill
- Chancellor George Osborne promises £3bn for infrastructure
- Economic growth is forecast to be 0.6% this year
- Service personnel to be exempt from public sector 1% pay rise cap
More details via Bloomberg:
Deficit
- 2013-14 budget deficit seen at GBP108b
- 2014-15 budget deficit seen at GBP97b
- “Deficit continues to come down”
- Budget measures to be fiscally neutral overall
Growth
- GDP forecast to rise 0.6% in 2013 vs previous est. 1.2%
- GDP forecast to rise 1.8% in 2014 vs previous est. 2%
- Govt slowly fixing economic problems
- We “must hold to the right track” in U.K. budget
- Budget to focus on schools, skills, infrastructure, industry
Tax
- U.K. to cut corporation tax rate by 1% in 2015
- Corporation tax rate to fall to 20% in 2015
- Govt to introduce a single-rate of corporation tax
- To increase country’s bank levy rate to 0.142%
- Pledges clampdown on tax avoidance
Needless to say, spending and debt will increase even more than expected, likely forcing more downgrade of the UK but at this point who cares.
Most importantly, the UK announced something quite dramatic - a government-funded housing subsidy. The government will to commit GBP 3.5 billion of capital spending over the next three years to shared equity loans. The Loans will be up to 20% of the value of a new-build home. The government will also offer mortgage guarantee to lenders to help them provide more loans to people who can’t afford big deposits. Guarantees will be sufficient to support GBP130b of mortgages, Osborne says. "These guaranteed mortgages will be available to all homeowners, subject to the usual checks on responsible lending,” Osborne says.
In other words, when all fails, the government will step in and reflate the housing bubble on its own, much like the US has been desperately trying to do for the past four years.
For anyone confused about the process, here is a quick cartoon explaining it all: