Tuesday, 22 June 2010

Budget summary and comment

For ordinary people like you an me, all this money-talk from the fast-speaking Chancellor may have been a tad confusing; I found it difficult to keep up with whilst watching and making some notes, especially as I'm economically-challenged. Therefore, I thought it might be a nice idea to summarise the key points from the budget, and because I'm an opinionated little git, give you some of my own comments, and finally round off the article with additional measures that I would have taken if I were Chancellor - just to remind you why it's a good thing that I'm not.



Firstly, I want to say I thought the budget was quite fair. However, the prospect of the implied 25%+ cut all budgets except health and international aid is a bit scary. Before I begin, I'd like to share the diagram below, which shows the deficit as a large black circle, with the white circles being reductions made from the cuts and tax rises. As we can see, there's still a pretty large amount left, but the deficit is expected to be much lower by the end of this Government's term. Then in 2015, Labour will win the election and set about increasing it again.



Departmental spending reductions

Rightyho, first on the list is something that I don't think was explicitly mentioned, but implied by the cuts announced. It's expected that all budgets - with the exception of international aid and the NHS - will face 25% cuts in their budgets. That's a quarter lobbed off each department. Presuming the Government continues to honour the Tory pledge , we can expect real-terms increases in spending on the health service, but with reductions in management and bureaucracy, and International Development (giving money to other countries) will also not be cut.

The Queen

The Civil List - the amount of money given by the taxpayer to the monarchy and their related staff in a terrible subversion of wealth redistribution - will remain the same. There will be no rises or cuts. I have made my feelings about the Monarchy clear, and I would like to have seen the Queen facing cuts like everyone else - after all, aren't we all in this together?

Public sector pay freeze

If you work in the public sector and earn less than 24,000 a year, your pay will be frozen. If you earn less than that, you can expect your salary to rise slightly.

The top brass public sector


Also in the public sector, a rule will be introduced that top civil servants cannot be paid more than 20x the salary of their lowest-paid employee.

This seems like a good idea to me, but I'd lower the 20x to 10x.

Operational allowance

The operational allowance will be doubled, taking it up to £29.02 per each day of deployment in Afghanistan. This is the additional pay on top of the salary of a soldier.

Retirement age

The Government is looking to push ahead faster with plans to increase the retirement age to 66, meaning that state pensions will not be issued until that age. They'll also be looking to end all forced retirement, ensuring people can continue to work for as long as they're able, rather than being forced to retire, but this will be delayed by yet another consultation - the coalition seems to do this with anything they can't agree about.

Benefits to CPI, not RPI

Benefits will now rise or fall due to consumer price index instead of retail price index. I don't understand the difference between these because I'm a moron, but this will save the Government money because benefits based on CPI will be cheaper than those base on RPI. For instance, according to the TUC, child benefit would be £18 instead of £20. These small differences could add up to save a reasonable amount of money for the Government. The exception to this is pensions, which remain based on RPI, meaning they don't lose value.

Tax Credits changes

Tax credits - the silly system of taking tax and then giving some of they money back - will be abolished for families who earn more than £40,000 a year, and changes in the boundaries will reduce it for some others.

The baby element of tax credits will be abolished. This was a tax credit payment for the first year of a child's life.

Health in Pregnancy grant

Abolished. This was a one-off tax-free payment of £190 for to-be mothers of at least 25 weeks pregnancy.

Child benefit payments


Frozen for at least the next three years.

Disability Living Allowance

All those seeking to claim the disability allowance will have to undergo a medical test to judge whether they are eligible.

Housing Benefit

Maximum limits will be applied to housing benefit payments, with a £280 a week limit on one-bedroom houses, and £400 for four bedroom homes.

National Insurance

A tax cut will be put in place for employers, making it cheaper for them to employ people. The amount paid by businesses on an employee's national insurance contribution will be reduced.

Corporation Tax

Another business-centric tax reduction. Osbourne was adamant that Britain must put up a big sign declaring that Britain is "Open for business" and said in order to do this and stimulate economic growth, we must attract businesses and make it cheaper to run one. Therefore, over the next four years, corporation tax will be reduced by 1%, taking it down from 24% to 20%.

Small business tax

This will also be reduced by one per cent to 20%.

Banking Tax

It was disappointing to see that the banks were not being punished more harshly. Given that much of the deficit that is now being cut was caused by the incompetence and lack of foresight of the banks, I think the Robin Hood tax should have been introduced. This would have applied a 0.05% tax on the transactions of banks, raising in excess of
£20 billion. Instead we have a half-arsed bank levy which won't raise nearly as much money as it could have.

VAT rising

VAT is being put up from 17.5% to 20% from January 2011, but it will not be extended to apply to currently exempt products or those with a reduced rate. This includes newspapers, books, and children's clothing. It was interesting to see Labour screaming bloody murder at this announcement, but it was fairly obvious they would have done the same thing; the party said they had no intention of doing it, but would not commit to not increasing it, and Labour candidates always dodged questions about it.

Capital Gains Tax increasing

The rate of capital gains tax will rise to 28% for those on salaries high enough to pay a higher band of income tax.

Income Tax changes

The personal allowance will increase by £1,000, up to £7,475. This is the amount you can earn before the Government begins to tax it, and the change will take effect in April 2011. This change also means that more people will be considered to be part of the higher rate of tax, and therefore earnings over the £40,000 will be taxed at a higher rate. Secondly, very low-paid workers will not pay income tax at all: nearly 900,000 people will no longer pay tax on their earnings.

Pensions changes

Pensions will rise each year in line with earnings, prices, or 2.5% - whichever is greatest. This restores the earnings link to pensions.

Scrapped

The planned tax breaks for the video games industry has been scrapped. This is disappointing, but I think anyone who gets hung up over this needs to recognise that there are more important things to sort out. Labour's planned increase in cider tax has also been scrapped, resulting in thousands of country bumpkins bursting into spontaneous singing of folk songs.

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So there's my summary of the budget. I think I've got just about everything, but I've got two sections left for you: a brief grumble about the debate following the budget reading, and very short list of what I'd do in addition to Osbourne's changes

[caption id="attachment_919" align="alignleft" width="300" caption="Hattie Harperson on Twitter"][/caption]

What drug had Harriet Harperson taken before the budget? She looked like a woman possessed. Her shrill, shrieking voice feigning utter contempt for the budget that had just been read, and her exaggerated arm movements made it look like she was delivering her yearly speech to the 'Men are Scum' club. It's like she was pretending that Labour would not have made any cuts, and we know that would be the case - they just didn't seem to know how to go about doing it other than tax rises on the rich (which I support). Whilst it'll always be one of those What-ifs of history, I would have put money on a Labour Government increasing VAT, and I find her protestations at the Coalition Government doing it annoying to the extreme.

And then once the budget was over, the Commons was populated primarily by nobodies that I'd never seen or heard of before. One of them was a bearded man who didn't really have anything to say, so attempted to do an impression of Nick Clegg, whilst one of his friends got stuck in a loop and kept saying about Cleggy: "Noooo, he's not listening", "Nope, not listening to his constituents", "It's a shame he's not listening." They could both do with growing up, or a sharp slap around their annoying faces. I'll volunteer.

1. An increase in the bank levy. I would have introduced the full Robin Hood Tax of 0.05% on bank transactions. This would raise a large amount of money, and banks should be well aware that they now must make amends for and make up for the pain the are partly at fault in putting us through. It is fair that the profitable and successful banks bear more of the burden.

2. All benefits would be means tested, ensuring that most of the middle-class are not eligible. I remember a tale I was told by my Dad who did some work on someone's car, who told him he was offered some kind of benefit by the Government (I don't remember what it was), and despite saying he didn't want or need it, the chap on the other end of the phone was insistent that he must have it. We need to get out of the situation of people and families more than capable of fending for themselves being giving benefits and credits.

3. Reduce the Government advertising budget. This was already frozen in the first round of £6 billion savings, but I think it ought to be reduced since we shouldn't be spending large sums of money on adverts in this age of austerity.

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