Budget 2011 – Reflections

When I go through the budget announcements I think on a couple of parallel lines. As well as the common ‘how am I affected’ line, I try to look at a wider effects of what the respective chancellor is trying to do or say through their budget plans.

For Osborne yesterday, I was distinctly underwhelmed. Not that I ever expected the budget announcement to be anything but irritatingly delivered in his slimy, sneering tones. Oops, did some of my political bias slip out there.

There are some good summaries around. I like this one from the BBC.

My A level Economics doesn’t really qualify me for detailed analysis but I’m always happy to give a point of view.

Ferrari 328 GTShttp2007@flickr

Fuel Duty

This is a purely selfish view and I raise that as an alert that is bound to irritate all my less urban readers but I don’t drive and yes, while I know that everyone doesn’t live in London and not everyone has access to the public transport system I might take for granted and I know fuel costs affect entire supply chains, we still have to account for the environmental and economic damage of our continuing reliance on fossil fuels.

Generally though, I’m fairly indifferent about the ‘headline’ for the budget but I have no doubt that even accounting for the fact that increased VAT will have raised the fuel duty over the 1p reduction which is ‘given back’, it will all make for good, positive headlines for the government.

There is some increase in the tax free car mileage allowance for those who use their cars for work but I pay no attention to these as I don’t drive. I know my transport costs have risen astronomically (thanks Boris) but I guess that will help people that drive. Again.

Income Tax

So the highest 50% tax rate is going to be reviewed? What about ‘we’re all in this together?’. Does that mean while benefits are cut and frozen and  public sector pay (yes, I know, the selfish element again) is frozen and VAT – possibly the most regressive tax in the ‘book’ – is increasing, the government has even considered dropping the 50% tax rate? Incredible. Just a reminder that this is the tax rate for those who earn over £150,000.

Personal tax allowances are going up which is generally good news although as reported the average gain by this will be 90p per week.

Pensions and Pensioners

On a positive note, I do think the idea of a flat rate state pension is good. So many people I come across in my work don’t claim pension credit which they would be entirely entitled to because they feel shamed into living on a pittance by a society that condemns the ‘claim culture’ even for those that desperately need every penny. Taking out the need to make a specific claim could potentially help a lot of people. However this will not affect today’s pensioners, more the shame.  This will take a long time to implement.

Sneakily as well, Osborne has reduced the Winter Fuel Allowance – as the Telegraph notes

Last night, it also emerged that pensioners are to lose out on winter fuel “top-up” payments that help them when bills are rising. This means the over-80s will see their payment reduced from £400 to £300. The allowance paid to the over-60s will drop by £50 to £200.

I haven’t honestly seen much reporting on this. It isn’t as if fuel prices are going down.

Public Sector Workers

Unsurprisingly Osborne bought into Hutton’s report on pensions in the public sector. As a public sector employee, it looks like my pension will be costing 3% more (plus the additional 1% rise in NI contributions that I’ll pay).  It isn’t something I’m overly happy about but it’s not surprising.

Some public sector workers earning below £21,000 will be spared the general pay freezes and receive an ‘uplift’ of £250. I was in favour of this but am disappointed that it only relates to NHS, armed forces, police service, teachers and civil servants but excludes local authority staff such as care workers and support workers.

Inheritance Tax/Charity Breaks

Again, I don’t expect my views to be popular here but Osborne’s provision to allow a tax break for large estates that leave 10% to charity was gormless to say the least. Personally, I think an increase in inheritance tax and yes, a death tax, is an entirely fair and progressive way to reduce some of the inequalities in our society. That won’t win votes though but I do think that there needs to be an examination of how ‘charities’ are defined. As long as Eton College remains a charity, the system of associated tax breaks has to be one that is questionable to say the least.  Did you know the Eton Rowing Club costs £300,000 per year to maintain? And they need charitable funds to help out. Can you imagine now, what £300,000 could do in a deprived area of your choice? How can those charitable donations demand equivalent tax breaks. It is quite sickening.

I missed any reports of anything related to assisting or recognising people with long term illness or disabilities. I didn’t watch the whole speech though. Perhaps I missed it.

Most papers have a ‘winners and losers’ page. It’s worth looking at this one from the Guardian.

Any list that has ‘higher rate taxpayers, drivers of gas guzzlers and people with jobs’ in the ‘winners’ section and ‘people without jobs’ who are going to be subject to the biggest ‘shake-up’ in benefits can’t be healthy and is indicative of the way the country is going.

It would be worth Mr Osborne remembering quite how many ‘people without jobs’ there are – a number that is increasing.

Initial Budget Thoughts

Osborne delivered the so-called ‘Austerity Budget’ yesterday. Cuts we were expecting and cuts is what we got although, and there is nothing original in me saying this, the ‘We’re all in the together’ mantra does ring a little hollow when it’s delivered by a multi-millionaire.

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I’d recommend Aethelread’s thoughts on the Budget as well. He has a well-considered piece (and I agree with a lot of what he wrote as well!).

I’ll run over my first thoughts on a few of the areas announced.

VAT Increase to 20%. Both unsurprising and disappointing. VAT is recognised as being the most regressive tax – yes, there are exempted items but that’s hardly an argument in favour of the increase. It is impossible to argue anything other than the fact that those with the lowest incomes will suffer the most from this increase. Yes, it will bring the money in for the government but it hardly rings of the ‘fairness’ that the so-called ‘new’ politics has lauded.

Capital Gains Tax increase I think this could and should have gone further and it demonstrates the lack of influence of the Lib Dems in the so-called ‘coalition’. The increase only affects those who have earnings and income over the higher threshold of £37,400. There is no doubt that the growth in the buy-to-let sector and people wanting to ‘make a killing’ in property led in part to the housing boom that saw prices skyrocket. It seems that those who pay CGT have somehow been subjected to less ‘pain’ than those who generally pay income taxes. Again, it has a vaguely regressive feel to it.

Personal allowance raised This is one of the few pieces of good news that I have seen emerge from the Budget.  It will directly help low earners and bring more people on low incomes out of the taxation regime.

Council Tax frozen This seems like good news but actually it worries me profoundly. My council froze taxes last year and local government is increasingly having more pressures places on it for funding. We are going to see a LOT of pain in local services as a result of this as the money just isn’t there. Savings can be made. Savings will continue to be made. Lets just hope they are made on cutting down on consultancy posts and biscuits in meetings rather than actual services and withdrawing posts in front line teams.

DLA medical assessments Currently DLA forms are horrific. They require a ‘professional’ as a ‘reference’ – GP, Consultant, Social Worker, CPN, OT. I’m not sure what will be achieved by demanding independent medicals apart from a further stigmatising of people who have disabilities and a creation of a great new trade for independent assessors. There seems to be a wish to appeal to the ‘Daily Mail’ contingent who directly relate ‘receiving benefits’ to ‘scroungers’ which provides an oppressive and discriminatory narrative to discussions about assistance for those who have disabilities. DLA in particular is a benefit to recognise the increased costs related directly to having a disability. I truly can’t see a purpose for these assessments except to plant a seed in the ‘general public’s’ collective mind that a lot of people who shouldn’t be receiving the benefit are. My experience is far more in Attendance Allowance (which is a similar benefit at a lower level provided to those over 65)  and to be honest, it is FAR more likely that people who are eligible do not claim than vice versa.

Child Benefit This has been frozen for three years. I can’t understand why it is not means-tested. Anyone who complains that it would be ‘too difficult’ to means-test, I’d argue that the government seems to find ways and means to introduce potentially costly measures such as ‘independent assessors’ for DLA then it can work out a way to means-test child benefit and direct it to those who have the greatest need.

Child Tax Credits Households with incomes over £40,000 will see eligibility for child tax credits fall. I haven’t really paid a great deal of attention to tax credits as, honestly, they seem incredibly complicated to me but I think that £40,000 bar sounds reasonable if cuts have to be made.

Housing Benefits Upper limits introduced to Housing Benefits paid. As someone who lives in London where the housing costs are the highest in the country, I can see these limits leading to an increased ghettoisation of families away from certain parts of the city. One of the joys for me about living in London is the way that there is a juxtaposition of rich and poor in many areas and that may well be a thing of the past. Of course receiving £104,000 in housing benefits in a year seems ridiculous but I suspect that is the exception that turns up on the front page of the The Sun or The Mail rather than the rule. The problem is that in some parts of the country, housing is very expensive. The answer in my very simplistic mind is that more social housing be built and maintained in the public sector as I am not sure I feel comfortable about the buy-to-let landlords growing rich on the back of LHA but no matter, there’s no way that’s going to happen.

All benefits to be cut Linking all benefits to the Consumer Price Index as opposed to the Retail Price Index will see an effective cut across the board to all welfare payments. We’re all in this together, right?

Public Sector Pay Frozen This is one of the ones that hits me directly. I can’t say I’m surprised. I am glad that the lower paid public sector employees have been exempted. To be honest, I can absorb a pay freeze adequately. It doesn’t fill me with joy but it’s better than tying my pay to the Consumer Price Index.

In general, I am left with an uncomfortable feeling that some of those least able to pay might be suffering the most  (VAT) and the way that DLA has been targeted seems to show very little understanding of the needs of those with disabilities other than a wish to appeal to a rabble-rousing press fixated on ‘benefits scrounging’.

But to roll out a well-used cliche, the proof of the pudding is in the eating. We’ll see. I have no doubt whatsoever there will be more cuts coming soon.

and I’ll raise a glass of cider to that!

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