Budget 2016: Spotlight on Osborne over deficit target – BBC News

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Media captionThe chancellor opened his 2016 Budget with comments about the UK economy

Experts are due to give their verdict on George Osborne’s ability to hit his fiscal targets after the chancellor unveiled a Budget featuring a sugar tax and gloomy economic forecasts.

The influential Institute for Fiscal Studies will scrutinise the chances of the deficit being cleared by 2019-20.

Mr Osborne said his Budget “puts the next generation first”.

But Labour attacked the decision to save billions by 2020 with cuts to disability payments.

The Opposition did give a cautious welcome to the the chancellor’s headline-grabbing announcement, raising 530m with a tax on the sugar content of soft drinks.

Other key Budget measures included:

  • Growth forecasts cut for the next five years and 3.5bn in extra public spending cuts by 2020
  • Mr Osborne missed his target of cutting debt as a share of GDP
  • A 2% increase in tax on cigarettes and 3% on rolling tobacco from 18:00 GMT, but beer and cider duty will be frozen as will the levy on whisky and other spirits
  • Plans for a longer school day in England
  • The rate at which workers start paying the top rate tax is to be raised from 42,385 to 45,000, with the tax-free personal allowance raised to 11,500 and corporation tax to be cut to 17% by April 2020
  • On savings, the ISA limit will be increased to 20,000 a year for all savers, and lifetime ISAs with a 25% bonus will be introduced for young people
  • An extra 700m for flood defences – to be paid with a 0.5 percentage point increase on the tax on insurance premiums
  • The higher rate of Capital Gains Tax is being cut from 28% to 20%

Despite warning of a “dangerous cocktail” of global risks, Mr Osborne told MPs he was still on course to eliminate the deficit by 2020, by making extra spending cuts.

But BBC political correspondent Alex Forsyth said independent analysts were warning this could be “very difficult” and saying the chancellor was “shuffling money around” to meet his self-imposed rules.

BBC experts analyse the Budget

Political editor Laura Kuenssberg: Can Osborne defy political history?

Economics editor Kamal Ahmed: Osborne stakes reputation on 2020 surplus

Business editor Simon Jack: Small businesses are the winners

Political correspondent Iain Watson: Corbyn gets mixed reviews

Mr Osborne is also facing a rebellion on the “tampon tax” from MPs across the House of Commons.

Currently VAT is charged at 5% on sanitary items, the lowest rate allowable under EU law.

But over 300,000 people have signed a petition calling for sanitary items to be exempted from tax altogether.

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Sugar in fizzy drinks


The amount of sugar in a 330ml can of Coca-Cola (7 teaspoons)


The recommended max. intake of sugar per day for those aged 11+

  • 520m The amount George Osborne expects the sugar tax to raise


In his Budget Mr Osborne said the proceeds of the tax would be distributed among women’s organisations.

But many MPs are believed to be unhappy and could support an amendment pushing for the tax to be abolished.

The issue has also gathered the support of Eurosceptic Conservative MPs, with up to 50 Tory MPs said to back an amendment to the Finance Bill.

Sugar tax

Mr Osborne said the proceeds from the tax on sugary drinks would be spent on primary school sports in England, with the devolved administrations in Scotland, Wales and Northern Ireland free to decide how to spend their share.

The tax, which was welcomed by campaigning celebrity chef Jamie Oliver, will be levied on the volume of the sugar-sweetened drinks companies produce or import.

The Office for Budget Responsibility (OBR) said it could result in a “pretty substantial price rise” on products – as much as 80% on, for example, a two-litre bottle of own-brand cola.

In other Budget announcements, Mr Osborne committed 300m for transport projects, and announced every state in England would be forced to become an academy.

Media captionJeremy Corbyn: Osborne’s Budget is culmination of “six years of his failures”

The OBR also said the government was going to breach its own welfare cap in every remaining year of this Parliament.

The additional spending is mainly caused by more people than expected being eligible for disability benefits, with the Personal Independence Payment (PIP) scheme costing 3bn more than expected in July.

Responding for Labour, Jeremy Corbyn delivered the Opposition’s response, describing Mr Osborne’s Budget as “the culmination of six years of his failures” which had “unfairness at its core”, while shadow chancellor John McDonnell described the scale of cuts to disability payments as “morally reprehensible”.

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