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Making sense of the budget

Date: 21. March 2012
Gavin Kelly

 

This post originally appeared on Gavin's New Statesman blog

“In this country we have to look upon budget promises as made of the same stuff as lover’s oaths.”  So said Lord Salisbury, three times Conservative PM, and his words are perhaps more apt than ever given that all the love drained out of the Coalition’s marriage some time ago. We need to sift carefully before being sure about what today really means.  

As with all Budgets we should start this process by asking what impact it will have on the overall economy, who wins and loses, and what it will mean for the political strategies of different parties. 

In terms of macroeconomics this budget was always going to be a non-event. It is broadly fiscally neutral, with only very minor upward ticks to growth forecasts. None of this is a surprise: this chancellor was always going to ignore those calling for more stimulus. This Budget, like all the others this Parliament, lives in the shadow of the choices made in the emergency Budget in June 2010 and subsequent spending review.

 

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A Budget For Working Families?

Date: 20. March 2012
Daniel Chandler

This blog originally appeared on The Huffington Post

Chancellor George Osborne says tomorrow's budget will be a budget for working families. "The bulk of the measures in the budget are going to be targeted at working people on low and middle incomes" he told the BBC's Andrew Marr on Sunday.

So, with budget day upon us, it's worth asking what a budget that genuinely put working families first would look like. At its heart would be a reversal of planned cuts to the Working Tax Credit (WTC) - which, as they stand, are set to hit precisely the people Osborne claims to be trying to help.

Why prioritise WTC rather than further increases in the personal tax allowance (PTA)? After all, if rumours are to be believed, working families can count on a substantial further increase in the level at which individuals start paying income tax towards the Lib Dem's flagship target of £10,000. This move will indeed benefit most working people on low to middle incomes - though not those earning less than the current threshold, due to rise to £8,105 in April. But raising the PTA is not a good way of targeting support at low and middle income households with relatively small benefits spread far up the income distribution, only petering out when individual earnings reach well over £100,000.

 

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Four tests for Osborne's Budget


Date: 20. March 2012
James Plunkett

This post originally appeared on The Spectator

With the Coalition taking pre-Budget briefing to new levels you’d be excused for thinking there’s little we don’t know about tomorrow’s statement. But here are four questions we can’t yet answer, and that will be crucial to assessing whether this is a Budget for low-to-middle earners as the Chancellor claims:

1) Will the new increase in the personal allowance be restricted to basic rate taxpayers? When the Coalition raised the allowance by £1,000 back in April 2011 they cancelled out the benefits to those at the top by lowering the 40p tax threshold. The second time around — the £630 increase that kicks in this April — they didn’t. From the sound of things, Osborne is now set to announce a further large increase in the allowance for 2013 and possibly even beyond. So will he focus the benefits on basic rate taxpayers this time?

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Osborne opts for the tax politicians love...

Date: 20. March 2012
Gavin Kelly

... and economists love to hate. 

This post originally appeared on Gavin's New Statesman blog

George Osborne's budget morning story, that Stamp Duty will go up to 7 per cent on properties over £2 million, shouldn't really surprise us. It has strong echoes of Gordon Brown's 2010 budget day story about hiking Stamp Duty up to 5 per cent on homes above £1 million in order to fund a tax cut for first time buyers. It's the tax that politicians have grown to love, and economists love to hate.

Not that the Chancellor will care much but he should expect plenty of gnashing of teeth from the dismal profession. Stamp Duty is after all a tax on labour mobility (a key economic resource), so it keeps people living in places they'd rather leave and makes it less likely they will move to take new jobs (though how much of a barrier this will be to those in a position to fork out £2m is far from clear). And the way it is currently structured results in major distortions in the housing market as small increases in house price generate large leaps in the tax owed.

 

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Budget 2012: George Osborne is hitting families even harder

Date: 20. March 2012
Vidhya Alakeson

 

This post originally appeared on The Guardian website

Although the chancellor will only step up to the despatch box to present his budget later today, we already know about the changes that will have the greatest impact on Britain's working families. That is because governments are in the habit of announcing changes years in advance, ensuring families are caught unaware when the changes are actually implemented. It was in his 2010 budget rather than today's that the chancellor announced a £2.4bn cut to tax credits that will take effect from this April. According to analysis from the Resolution Foundation, none of the 2 million families on low to middle incomes currently claiming working tax credits will be unaffected, with some standing to lose thousands of pounds.

This year's cuts follow hard on the heels of last April's cuts to tax credits. With the price of essentials still high, many families are struggling to see how to tighten their belts further. Heating has already become a luxury, as has the car, and they have already downgraded to value brands at the supermarket. In a survey of nearly 2,000 parents conducted by Netmums, the online parenting organisation, more than half of those surveyed felt they were living on the edge, with only a small increase in spending or a small decrease in income enough to tip them into crisis. Nearly one in five parents reported skipping meals themselves to make sure they could still put food on the table for their children.

 

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