George Osborne took over as Chancellor in May 2010, replacing Alistair Darling after an inconclusive general election which gave the UK a coalition government under David Cameron. He had been Shadow Chancellor for the previous five years, having been allegedly the third choice of Michael Howard after the Conservatives lost the 2005 general election.
Mr Osborne’s term as Chancellor ran for just over five years (May 2010 to July 2016), ending when he was sacked by Theresa May in the fall out from the Brexit vote. He came from a wealthy background, his father being the co-founder of the Osborne & Little wallpaper company.
What he did
His first Budget, classed as an emergency Budget, was in June 2010. It took place in the wake of the financial crisis, with government debt ballooning to 10.8% of GDP in 2009/10 and annual economic growth having hit a low of -6.1% in the first quarter of 2009:
- The standard rate of VAT was raised by 2.5% to 20% from January 2011.
- Capital gains tax was revised, with the single flat rate of 18% kept for basic rate taxpayers only. Higher rate taxpayers saw their rate increase to 28% from the day after the Budget. However, the entrepreneurs’ relief limit was raised from £2m to £5m.
- Corporation tax cuts of 1% a year for four years were promised, starting in 2011.
- Insurance Premium Tax was put up by 1% to 6% from January 2011.
In 2010, Osborne also set in train what was to become the Office for Budgetary Responsibility (OBR). The main aim of the OBR’s creation was to end the manipulation of Treasury forecasts that marked Gordon Brown’s era as Chancellor. In October 2010, he revealed the results of a Spending Review, fixing departmental spending through to 2014/15. This contained average real term cuts of 25%, except for health and international aid. Osborne’s deficit reduction efforts were split roughly 80/20 between spending reductions and tax increases. His first Spring Budget in 2011 was presented as a “Budget for Growth”:
- Corporation tax was cut by 1% more than announced in the 2010 Budget, to 26%.
- The personal allowance was increased by £1,000, with the promise of another £630 increase in 2012/13 (and a £630 cut in the size of the basic rate band).
- EIS and VCT rules were reformed, with EIS income tax relief increased from 20% to 30% and the EIS investment limit doubled to £1 million.
- The annual allowance was cut to £50,000 from 2011/12 and the lifetime allowance to £1.5 million from April 2012.
- The lifetime limit for entrepreneurs’ relief was doubled to £10 million.
- The tax screw was tightened on non-doms.
- The default basis for indexation of direct taxes was changed to CPI from 2012/13.
Osborne’s third Budget in 2012 was labelled the “omnishambles Budget”, by Ed Milliband, with the introduction of the notorious “pasty”, “cathedral” and “granny” taxes. In addition:
- The additional rate of income tax was cut from 50% to 45% from 2013/14.
- The personal allowance was given an increase of £1,100 from 2013/14, but again there was a reduction (£1,025) in the basic rate band to limit the benefit for higher rate taxpayers.
- A tax on child benefit, in the form of an income tax charge for those with incomes above £50,000 was announced, to take effect from January 2013.
- The top rate of SDLT was raised to 7% on residential properties valued at over £2 million and a new 15% rate was introduced for residential properties valued at over £2 million and a new 15% rate was introduced for residential properties owned by companies and trusts – another attack on non-doms.
- A cap on unlimited income tax reliefs of £50,000 or 25% of income was announced.
After his 2012 Budget, Osborne has little choice but to be more cautious in his 2013 Budget.
- The personal allowance was increased by £560 to £10,000 for 2014/15.
- The single tier pension’s arrival in 2016 was confirmed.
- The £2,000 NIC Employment Allowance was announced, to start in 2014/15.
- Corporation tax was to be unified at a 20% rate for all companies, from 2015.
- The annual allowance was cut to £40,000 and the lifetime allowance to £1.25m from 2014/15.
- The annual investment allowance was increased from £25,000 to £250,000 for two years from 2014/15.
- The annual investment allowance was increased from £25,000 to £250,000 for two years from January 2013.
Osborne’s fifth Budget in 2014 was the one which stands out in many people’s minds, as it saw radical reforms to pensions announced which, somehow, had avoided the usual pre-Budget leaks:
- Drawdown for money purchase pension became available without limits or restrictions on entitlement, heralding a precipitous fall in annuity business.
- The commutation rules for turning small pension pots into cash were greatly relaxed.
- The savings rate of tax was reduced from 10% to 0% and the band widened from £2,880 to £5,000 from 2015/16.
- The ISA limit was increased from £11,880 to £15,000.
- The annual investment allowance was doubled to £500,000 from April 2014 to the end of 2015.
- A new fixed rate savings bond for pensioners was announced, to be launched in January 2015.
His 2015 Budget was a game of two halves, either side of the general election (which it is thought Osborne expected the Conservatives to lose):
- The Help to Buy ISA was announced, to start in late 2015.
- The lifetime allowance was cut to £1m from April 2016.
- The higher rate threshold was given its first above-inflation increase in seven years.
- The personal savings allowance was announced, to take effect from 6 April 2016.
- Following on from his earlier pension reforms Osborne announced plans to permit sales of existing pension annuities from April 2016 (though this idea was eventually abandoned).
- A new tax treatment of dividends, including a £5,000 dividend allowance, was announced.
- Non-doms UK resident for at least 15 of the last 20 years would be treated as UK domiciled for tax, including inheritance tax (IHT) from April 2017.
- Corporation tax cuts to 19% in 2017 and 18% in 2020 were announced.
- A cut in the annual investment allowance to £200,000 from 2016 was announced.
Osborne’s final Budget, in 2016, came a few months before the referendum, which at the time looked like a probably ‘remain’ victory.
- The Lifetime ISA was announced, to be launched in April 2017.
- Capital gains tax rates were unexpectedly cut by 8% (apart from residential property and carried interest).
- The ISA limit was increased to £20,000 from 2017/18.
- A further corporation tax rate cut to 17& in 2020 was announced.
- Stamp duty on non-residential property was restructured onto a band basis.
The referendum result effectively ended Mr Osborne’s career as Chancellor. It is perhaps too early to know what his six years at the helm will be remembered for, but the creation of the OBR and pension tax reform seem certain to be on the list.