Here’s a VERY brief review of the 2012 Budget.
Overall, I was very impressed with the Budget. The biggest criticism I have has been how it has been leaked to the media in the past week. This needs to stop!
Today’s budget ensures that overall the wealthy will pay more in tax. Five times more in fact. They may be receiving a tax cut, but they will pay more overall in tax. But crucially it has taken TWO million people out of income tax all together. It is a budget for the millions.
Cutting the 50p tax rate
Osborne noted that £16bn had been shifted into the previous tax year to avoid the 50p tax band, and an additional £1bn had been avoided this year. Self-tax receipts were poor. He abolished the 50p tax rate and introduced a 45p band (from April 2013), which the OBR predicts will raise 5 times as much in revenue. Raising more in tax revenues is great news for everybody in society. (Read here for an explanation of the Laffer Curve.)
At the same time he announced a crack down on tax avoidance and an increase in stamp duty avoidance (up to 15%)
7% on £2m homes. That’ll please Vince Cable you have to imagine.
Raising the tax allowance
Osborne announced the largest ever increase in the personal allowance in history. A £1,100 increase to £9,205. This ensures that over 2 million people won’t pay income tax at all. It’s great news for ordinary workers as well, giving the everyday person more cash in their pocket.
Altering the current scheme, which had its flaws to ensure that child benefit to be reduced incrementally when one member of household earns more than £50,000. And that it will be removed completely at £60,000. Good news. Universal benefits are a shocking idea.
A mixed bag here. No additional increase to alcohol duty, but then a whopping 5% increase on cigarettes. That’s 37p per pack. I’d like to reaffirm my belief that the Government should have no influence on what people do to their bodies, however much revenue it raises for them.
Cut from this April to 24% with future tax cuts in the years to come. This is a pro-growth and a pro-business move. It’s exactly what we need in the tough times we live in. It will also make the UK one of the cheapest places to do business in the G20.
Osborne is planning to set up an enterprise loan fund, similar to the student loan company for young entrepreneurs who need help starting up. This was an idea banded around last year and gained popular support from people like Richard Branson. Again, another good idea, we need to stop the university culture in the UK and encourage students into business and apprenticeships as well.
Slashing £10bn by 2016 from the Welfare Budget. The welfare budget is incredibly high that’s for sure, accounting for 1/3 of public spending. It is unsustainable, we have to save money somehow on welfare, but the decisions on how to do this need to be looked at carefully. Scrapping universal benefits is a good starting point.
Tax credits for video games, animation and TV production in the UK. Another pro-growth and pro-business move.
Bank levy to be increased to 0.105% from next January, raising £2.5 billion a year. Taxing the banks, leaving Labour with nowhere to turn.
Where next for Labour?
Who knows? They cannot oppose a tax cut that will raise more revenue. They cannot oppose the personal allowance, the corporation tax cut or the bank levy. Worrying times ahead for Ed Miliband and co.