One of the biggest areas of concern for many ahead of the chancellor’s Budget was addressing the productivity problem.
The Treasury said the upcoming productivity plan would help realise “our ambition to be the world’s most prosperous major economy by the 2030s”.
During his speech, Osborne claimed that the UK still spends too much and still borrows too much, while the productivity problem reflected that Britain doesn’t build enough or invest enough. Many of Osborne’s other targets will rely on this picking up – and he’s expected to outline further discussion about investment in infrastructure and skills on Friday.
— RBS Economics (@RBS_Economics) July 8, 2015
Osborne said the government must be “bold in delivering infrastructure”. He mentioned the road network as a key area that needed to be addressed here. While four fifths of transport journeys in the UK are by road, we have been trailing other countries, such as Namibia and Puerto Rico, in terms of the quality of the network.
In the last 25 years, France has built 2,500 miles of motorway, while the UK had built 300.
Osborne said that by 2017, three quarters of new cars won’t pay vehicle excise duty (VED) as they are fuel efficient. He claimed that only Labour could have designed something “so regressive” as it penalises those who cannot afford new cars. There will be a new VED tax for new cars from 2017, which will apply in three bands – zero emission, standard and premium – and will go towards a Roads Fund from the end of the decade. For standard cars, which Osborne said would cover 95 per cent of all cars sold in the UK, the charge will be £140 a year.
Read more from our summer Budget commentary:
- George Osborne says tax dodgers have “nowhere to hide”
- George Osborne adds more detail to Northern Powerhouse plans
- Compulsory national living wage gets mixed reception
- George Osborne permanently fixes Annual Investment Allowance at £200,000
- Cut in corporation tax welcomed by British businesses
- Apprenticeship levy so firms “get back more than they put in”
- Roads Fund introduced as part of the plan to boost productivity
In total, the same amount of revenue will be raised from VED in the future as is currently raised, but Osborne said the revenue will be secure for the long term. Fuel duty is to remain frozen this year. The government will engage with the devolved administrations on how the money will be allocated there. “Tax paid on people’s cars will be used to improve the roads they drive on,” he said, reiterating that it should be a “major way to improve productivity”.
The announcement prompted the Green Party’s Caroline Lucas to tweet that the chancellor “says building new roads good for productivity. Yet own stats show bad value for money and worsens air pollution”.
While other infrastructure projects such as Crossrail 2 and Olympic Village were mentioned, Osborne also said the government would be committed to ensuring the Northern Powerhouse got off the ground too.
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