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Budget Report

Wednesday, March 28, 2012

What we needed to see in the 2012 budget announcement was a focus on jobs and growth as well as helping the most vulnerable in our society on middle and low incomes. Instead this budget continues to benefit the highest earners, putting pressure on hard pressed families up and down the country. As a result, 14,000 people earning 1 million or more are getting a tax cut of over 40,000 each year whilst a family with children earning just 20,000 lose 253 a year from this April. This is on top of the VAT rise, which is costing a family an average of 450 per year. 

 

The government have the wrong priorities. They are cutting taxes for the richest 1% of earners whilst fuel prices are rising, tax credits and child benefits are being cut and one million young people are out of work. By getting rid of the 50p tax rate, HMRC’s review confirms that the government will be cutting taxes by 3 billion next year for those earning over 150,000 a year. This move is a gamble and the government are hoping that the tax cut will get 2.9 billion back from people currently avoiding tax. The results of this move have been described as uncertain by the Office for Budget Responsibility.

 

There will be a 3 billion tax raid on pensioners over the next 4 years. A freeze on personal allowance will see 4.5 million pensioners who pay income tax loosing an average of 375 per year as of next April. Pensioners turning 65 next year are set to lose out by 314. The improved changes to child benefits are a small step forward, but it does not change the fundamental unfairness of these changes. A one earner family on 55,000 would lose much of their child benefit, while a couple on as much as 99,000 could keep it all. In terms of housing, there are 300,000 people benefiting each and every year from the Chancellor’s top rate tax cut. But there are just 4,000 houses sold each year for more than 2 million. So 99% of those who gain from his tax cut for the richest will be totally unaffected by his rise in stamp duty.

 

Overall, the increase in the personal allowance is outweighed by the VAT rise, cuts to tax credits and higher petrol duty. Tough decisions on tax, spending and pay must be made, however the deficit will not be reduced unless we have a plan for jobs and growth to get our economy moving again and get people into work. The government is set to borrow 150 billion more than was planned in the spending review because failed economic policies have delivered slower growth and higher unemployment. Trying to raise taxes and cutting spending too far and too fast has backfired.

 

Below I have set out the key facts and figures covered in the 2012 Budget.

 

Income tax

From April 2013, the 50p top rate of tax will be cut to 45p. Personal income tax allowance has been raised to 9,205 from April 2013, making 24 million people 220 a year better off. In the future there will be no difference between the personal allowance for pensioners and other tax payers. This will start in April 2013 but will not affect current pensioners whose personal allowance will be frozen.

 

Child benefit

This will be phased out when someone in a household has an income of more than 50,000. It will fall by 1% for every 100 earned over 50,000. Only those earning more than 60,000 will lose the entirety of the benefit.

 

Jobs and skills

The Office of Budget Responsibility forecasts unemployment to peak this year at 8.7% before falling each year to 6.3% by 2016-17 and that one million more jobs should be created in the economy over five years.

 

Housing

From midnight, there will be a new stamp duty level of 7% for homes worth more than 2m. Any such homes bought through companies will pay 15%.

 

Business

Corporation tax cut to 24% from next month. By 2014 it will fall to 22%. There will be a relaxation of Sunday trading laws on eight Sundays during Olympics and Paralympics, starting July 22.

 

Fuel, cigarette and alcohol duties

Duty on all tobacco products will rise by 5% above inflation from 18:00 21 March the equivalent of 37p on a packet of cigarettes. There will be no change to existing plans on alcohol duty. There is no change to existing plans on fuel duty. Vehicle excise duty is to rise by inflation, but will be frozen for road hauliers.

 

Pensions

There will be an automatic review of state pension age to ensure it keeps pace with increasing lifespans. New single-tier state pension for future pensioners will be set at about 140 and based on contributions.

 

Transport and infrastructure

Network Rail will extend the Northern Hub, electrification of the Transpennine rail route and upgrading the Hope Valley line between Manchester and Sheffield. A report on the future of aviation in south-east England will be published in the summer.

 

Armed forces

The cost of operations in Afghanistan will be 2.4billion less than expected. Money saved will provide an extra 100 million to improve military accommodation and the family welfare grant and council tax relief for armed forces serving overseas will be doubled. 


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