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Budget day in the UK

lord henry strikes back

17:47 / 21.03.07

You can find the Guardian article here along will the main points, but there will be info in all major UK papers.

I know a lot of people don't find this stuff very interesting but it does have a huge affect on everyone living in the UK and I think that's worth talking about.

As far as I can see the main point of contention will be the lower rate tax cut from 22% to 20%. While this was announced as a positive step for the poor what was less publicised was that the very lowest bad of tax, that paid on the first £2,150 above your tax free allowance will actually go up from 10% to 20%. The affect of this will be that the lowest earners (below about £14,000 a year) will end up paying more tax.

The other point here is that this is a Labour government cutting income tax, and doing so in the face of a resurgent Tory party. I can see Brown getting hit on both sides with the Tories claiming this as 'proof' that lower taxes are the way forward and Lib Dems saying that it's not actually a tax cut at all.

Road tax on the most polluting cars will be ramped up to £400 over the next couple of years. I think this is a good move, and preferable to a steep hike in petrol duty which would hurt the poorest most. Nonetheless, I still don't think that this is going far enough.

Also on the environmental track there is a pledge that all 'carbon neutral' homes will be free of stamp duty by 2012. I like this for two reasons: 1) It shows a positive (though still too small) interest in the environment. 2) 2012 will be right about when I'm looking to buy a house.

Cigarettes have been hit with another big tax increase (11p per pack). Despite being a smoker I'm not completely against this. Cigarettes are a luxury and if you're going to pay high taxes on anything then it should be luxuries. On the flip side the increases on alcohol will be quite small and there is no increase for spirits (Gordon is well known for his love of fine whiskeys).

Anyway, that's my take on it all, what about the rest of you?

19:31 / 21.03.07

First thoughts, based entirely on the Guardian article ...

I was planning on giving up social drinking and cigarettes this summer anyway, in favour of hard drugs, on the basis that prices there are counter-inflationary, and consumption doesn't affect your insurance status, so I'm not bothered about the rise in duty on tobacco and wine. And if for whatever reason I can't get what I need from the marketplace, I suppose I'll always be able to access oblivion in a bottle of scotch. So, thumbs up there.

I'd be interested to hear how the son of the manse justified abolishing the 10p in the pound rate (I mean, really, what have low earners done to deserve that kind of treatment, apart from possibly not turn out to vote in the numbers they might have done) while at the same time raising the threshold on the higher rate; no doubt he's done his sums, but it seems fairly cruel. Similarly, cutting corporation tax while making life more difficult for small business looks harsh.

If this is any indication of how he's going to approach the next election, I suppose Middle England and the City can look forward to some big love from Kylie's new pal, which doesn't really come as much of a surprise.

Personal animosity aside, it's difficult to see what Mr Tonty's worried about, in terms of the New Labour legacy.

Shiny: Well Over Thirty

19:42 / 21.03.07

Yes, getting rid of the lower rate of income tax in favour of reducing tax for the better off had me in screaming, impotent headsick rage for a little while this afternoon. I mean have we reached the point where it’s now acceptable for politicians to not only rob from the poor to give to the rich, but not even to bother trying to hide that one is doing such?

On the subject of alcohol it does seem a little odd at a time when heavy drinking is considered in some quarters to be a fairly serious problem that we’re taxing beer and wine more, whilst not doing so for good old Tesco’s own brand ten quid for enough to kill a mule spirits.

lord henry strikes back

23:17 / 21.03.07

On top of increasing the top end of the base rate tax bracket (from £38,000 to £43,000) Gordon has also expanded the amount that you can make in capital gains tax free (now over £9,000).

Put it all together and you've got a pretty nasty situation. Let's take two couples. The first is on a joint income of £25,000 per year. On that kind of money they live month to month with no investments and no savings. Their tax free allowance (combined) is just over £10,000.

Now, our second couple have a bit more (due mostly to having parents that could pay for them to get through uni etc.) In addition to the tax free £10,000 mentioned above they can make another £18,000 in capital gains and, factoring in other tax free saving plans, a further £1,000 in interest on savings. That's £29,000 before they pay a penny of tax.

This really can't be a good way forward.

Our Lady Has Left the Building

06:41 / 22.03.07

This was the most striking thing for me about the budget, I found him standing outside:

John Bull for John Reid

Tryphena Absent

11:42 / 22.03.07

Well this is exactly what I would expect from the tory party etc. etc.

14:40 / 22.03.07

It sounded green on the radio but really it was a bit of a Tory budget.

19:26 / 22.03.07

It did - very pro the traditional family and the middle class, ticking boxes and balancing everything out.

I did a little test on the BBC site, which told me that I'd be 1500 pounds worse off - but considering that the industry I work in is dead and i haven't worked for oh, eight months, I doubt I can be any worse off!

19:34 / 22.03.07

I think every single person at my workplace is worse off except the company directors.

lord henry strikes back

21:37 / 22.03.07

I just did the BBC calculator thingy (link here) and it turns out that I'll be down £50 on the whole year. That's less than £1 a week, so no big.

I should point out that I'm not a big earner (In fact I'm a relatively low ranking civil servant) but I'm not paid too badly. I also don't drive (mostly because I live and work in London so I simply don't need to). If I earned a few thousand less and had no choice but to drive I would have taken much more of a hit.

The more I look at it the more the main aim of this budget appears to be propping up the middle class vote whilst trying to put a bit of pressure on the Tories over the centre ground (which is, admittedly, the centre right from where many of us are standing). A friend at work described it as an 'election next year' budget. I think he may have a point.

Tryphena Absent

11:22 / 23.03.07

I'm £43.29 better off, which is about what I expected.

jentacular dreams

12:00 / 23.03.07

Same here - £53.99 better off. But then as a student I don't pay taxes so I'm not sure how reliable that will be.

Janean Patience

13:09 / 23.03.07

(In fact I'm a relatively low ranking civil servant)

I misread this as "owl servant" when glancing through. How have workers with owls and nightbirds been served in the current budget? Are they better off?

13:52 / 23.03.07

I don't earn very much at all, as I work part time (falling well below the £14,000 mark), and according to the calculator I will be £63 better off - but I don't drive or smoke and am not a huge drinker, so that's obviously a big influence. If (like lord h.) I had to drive I would be in a much worse position.

Shiny: Well Over Thirty

16:56 / 23.03.07

I am also a fairly low paid civil servant, earning a little over 15000 a year and, the calculator tells me that I'll be £37.98 better off, excluding drinking, because I barely drink at the moment so I didn't put anything in for that. I found this surprising, as most of the analysis has been saying that if you are single and earn under 18500, and my calculations backed this up. Then read the disclaimer at the top, that said the changes to income tax aren't included in the calculator since they won't kick in until next year, which explained a lot.

18:25 / 24.03.07

Oh really? Well that's a fat lot of good then! Tssk.

09:22 / 27.03.07

[B]Yes, getting rid of the lower rate of income tax in favour of reducing tax for the better off had me in screaming, impotent headsick rage for a little while this afternoon. I mean have we reached the point where it’s now acceptable for politicians to not only rob from the poor to give to the rich, but not even to bother trying to hide that one is doing such?[/B]

My understanding was that the changes to the working tax credits system would actually make people on lower incomes better off than they currently are. Perhaps it's cynical of the Government to make it so you have to [i]apply[/i] for the tax credits, knowing that some people either won't know about it or won't bother and consequently it's cheaper than just changing the automatic tax rate, but the option is still there, as I understand it.

Shiny: Well Over Thirty

15:13 / 27.03.07

My understanding is that this only works for those with children. My understanding is that almost any childless single person working time will almost always be earning too much for Tax Credits to make them anything other than worse off than they currently are under the system - I'm far from expert on the Tax Credit system, but as I say most of the analysis I've seen from those who do seems to suggest that those without children who earn less than 18500 will be worse off.

lord henry strikes back

17:02 / 27.03.07

Yes, as far as I know tax credits only apply to those with children. On top of this the latest round of figures showed that 40% of people eligible for credits have not applied for them. In part this is due to people not knowing about them but there is also the fact that it is complex and the forms are long and none to easy if your English isn't great, a problem that is most common among those most in need of the money.

Finally, there have been a lot of problems over the past few years with people on variable incomes (very common for labourers and tradesmen). Due to the way the credits are calculated people have been paid back too much tax and then, come the end of the year, ended up owing the government money that they do not have. In some cases totaling thousands of pounds.

I can see the merits of the tax credit system in theory but in practice it has, so far, not worked too well. It should either be scrapped in favour of lower base rate taxes, paid for by higher top rate taxes, or they should be calculated by the tax office (correctly) rather than waiting for people to apply. I realise that this would mean more work and so more money, but that also means more jobs, which is rarely a bad thing.

17:17 / 27.03.07

lower base rate taxes, paid for by higher top rate taxes

Careful, that sounds like socialism- not a popular position in the labour party.

lord henry strikes back

18:47 / 27.03.07

That's not socialism!

Socialism is only having one 4x4, two tonne military vehicle per family.

And now, back to politics.

09:37 / 28.03.07

Yes, as far as I know tax credits only apply to those with children.

No - that's not accurate. Child tax credits are only available to those with children. Working tax credits are available to people below a certain income, who work more than 30 hours a week, whether they have children or not.

17:36 / 28.03.07

link

"To claim Working Tax Credit, you have to be aged 16 or over, work for 16 hours or more a week and at least one of the following:

be responsible for a child or qualifying young person
have a disability that puts you at a disadvantage in getting a job
be aged 50 or over and be returning to work after a period on benefit

If none of these apply you must:

be aged 25 or over and usually working at least 30 hours a week"

18:40 / 28.03.07

Sorry, can someone clarify-me on these working tax credits, please. Are they a new thing? Do they make everyone who meets the criteria (which seems to me to be at mainly some, means-tested, workers over 25yo, working >30 hours a week, or those with dependents) fill out forms in order to not be excessively taxed? Do they effectively mean that PAYE is not PAYE?

I presume not, and that this is a complicated way of raising the tax-free allowance so that low-earners don't end up out of pocket due to the abolition of the 10% band.

?

Shiny: Well Over Thirty

19:09 / 28.03.07

They've been around for years. Having a quick scout around the HMRC website I found that Working Tax Credits only seem to be available for those single people on extremely low incomes - the part of the site I saw said below about 11,000 a year, although I think this was a year or two out of date.

Again my understanding was that the Tax Credit provisions, whilst already existing for everyone, have only actually been improved for those with children in the latest budget. If they have been improved for the childless it's certainly not in the headline parts of the budget mentioned on the HMRC site.

If no-one else gets there first I'll do some searching and try to get some more hard facts on exactly how it works at the weekend.