Well, The Budget was as compelling as ever and some really interesting headlines came out of it. Don’t be blinded by the political stance of which red top / broad sheet you read……just simply understand the headlines:
Personal Allowance
This will make the front of all newspapers – the increase in personal allowance before we pay tax. It is the largest ever increase and is designed to ensure that we have more money in our pocket. As long as you earn under £100,000 a year, you will be better off. End of.
Why?
Well, you would be forgiven for thinking that ‘they’ were simply trying to make living a little easier for everyone given rising costs, no / limited pay rises, etc, given the manner in which it was delivered (“a budget to support working families”). However, you’d be wrong.
The real reason is to get us spending. The more money in our pockets, the more confident we are to spend. That then grows the economy and the Government earns more through taxes on goods / services. Clever isn’t it?
Headline Grabber Rating: 9 / 10
See Through Rating: 8 / 10
Corporation Tax
The rate at which businesses pay tax will reduce over the next couple of years from 25% to 22%.
Again you would be forgiven for thinking that this was to reduce the tax burden on businesses and help them to survive during troubled economic times (“a budget to support business”). You’d be wrong again though.
The UK has one of the highest rates of business tax in the G20 group of nations. By reducing business tax rates it attracts foreign companies to establish operations here. This leads to job creation, a growing economy, more tax revenue, etc.
Headline Grabber Rating: 6 / 10
See Through Rating: 8 / 10
50p to 45p Tax
The rate at which those earning over £150,000 a year will reduce from 50p to 45p.
Now this one will cause some head scratching, especially as we were lulled into the messages of the “rich paying more tax than the poor”. This is what the opposition majored on during their response when Ed Miliband asked the same question. I’d love to say it was pure theatre on a knife edge but it simply resembled overpaid public school boys doing pantomime. Oh yes it does.
Anyway, back to the plot……It is all very well to have low Corporation Tax for business to encourage foreign investment but you won’t encourage foreign business leaders to drive the businesses as they will pay a top rate of 50p. Better get that rate down to 45p then.
Headline Grabber Rating: 9 / 10
See Through Rating: 8 / 10
Child Benefit
This one was my favourite.
So, you’ll recall that Child Benefit was to be scrapped for any household where one of the parents earned £40,000 or more. Problem was, they didn’t really take into account that some households may have two parents earning (say £35,000 each = £70,000) compared to some where there was just one earner at £40,000. The £40,000 family would lose Child Benefit compared to the £70,000 family that would not. Political comedy at its best but at our expense.
So rather than admitting that they had done an ‘Alistair Darling’ they decided to tweak it by reducing Child Benefit on a phased scale from £50,000 to £60,000 (when it is completely removed). So not completely sorting the ‘Alistair Darling’ out but avoidance of a u-turn in the short term.
Face saved? Yes. More money in pockets to spend (see ‘Personal Allowance’)? Yes. Job done then.
Headline Grabber Rating: 6 / 10
See Through Rating: 9 / 10
State Pension Age
Just when we thought that the mess of the State Pension age had been cleared up by increasing the age to somewhere between 65 – 68, a further bombshell went off.
“State Pension Age Review is to be undertaken immediately in line with rates of longevity”.
Now call me a sceptic, but I am pretty sure that when a review of the increasing life expectancy age highlights an increasing life expectancy age (it’s not rocket science is it), the State Pension age will increase further.
Why?
Pretty simple really. We have no money set aside for any of our State Pensions and they are currently paid for from the National Insurance contributions paid by those in work. If there are more people in retirement than paying National Insurance, that creates a hole that needs to be funded through Government borrowing. Simple solution required then……increase the State Pension age to create less people needing a pension. End of.
Headline Grabber Rating: 7 / 10
See Through Rating: 9 / 10
The Budget is meant to be all about setting out policies to grow the economy without bankrupting ourselves in the meantime. Call me a bitter and twisted “(insert word)” but it seems to be about creating good headlines and scoring political points more and more.
Oh well, that’s that for another year.
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