Deloitte Preview Of Summer Budget 2015

Ahead of the Summer Budget on 8th July Ian Stewart, Deloitte's chief economist, Mike Turley, head of public sector, and Bill Dodwell, head of tax policy at Deloitte, consider the economic outlook, the state of public finances and potential tax announcements.

Economic outlook

Ian Stewart, Deloitte's chief economist, said: "The UK economy is showing an enviable combination of decent growth, low inflation and falling unemployment. But while growth has been revised upwards, challenges remain. The two defining economic tasks facing the Conservatives in this Parliament are to eliminate the budget deficit and to revive productivity.

"The Government has an ambitious target for debt reduction and for cutting public expenditure. The July Budget will map how Mr Osborne intends to meet those plans by specifying how cuts to departmental and welfare spending will be financed.

"Raising productivity is Mr Osborne's second big target, and his Budget is likely to have a strong pro-growth, pro-business theme. Support for vocational training and for improving the growth trajectory of areas outside the South East of England, particularly through the Northern Powerhouse programme, are likely to feature prominently."

Public finances and public services

Mike Turley, head of public sector, said: "Across the public sector there is uncertainty about the three financial years ahead. Office for Budget Responsibility forecasts suggest that cuts in 2016-17 and 2017-18 will be twice as deep as any annual cut in the last Parliament. Then further cuts in 2018-19 will be comparable to those under the coalition.

"Against that backdrop, watchdogs and commentators in the NHS, local government, policing and further education have all sounded alarms about financial stability and the impact of further austerity within their sectors.

"The Chancellor is expected to set out in the Summer Budget, at least in part, how £12 billion will be taken out of welfare spending. He also looks likely to talk about productivity – potentially both public and private sector. To date we haven't heard enough about improving productivity within the public sector. Deloitte calculated last year that saving one per cent of public sector workers' time through productivity measures can save £1.64 billion per year. Improving this, and breaking the link between only getting out of public services what we put in, will be key to putting the finances on a sustainable footing."

Tax

Bill Dodwell, head of...