Well the budget is out and the usual childish debating has started in Parliament, there were few shocks in the budget with the possible exception of the fact that many commentators believed that the recent warnings from the Chancellor and other key figures were softening us up for a budget which would then look tame in comparison. However I think that this Budget really is the first step towards the pain we will all have to bear in the coming years, however if Mr. Osbourne is to be believed (And I have no reason not too.) then in just five years we will be looking at a balanced budget, this is much quicker than Labour suggested and considerably quicker than even many Tory supporters thought were possible, before you get excited though, obviously this is simply the point at which the government can start to work on clearing the massive debt that it will owe, but luckily that should be less than the 1.5 Trillion that labour wanted us left with. (£1,500,000,000,000 – I feel it is good to see it written in numbers in case we forget what a really large number it is.)
Like everyone else I do not want to take the pain that is coming up, and with only one income coming in and a young baby at home it will be a real struggle, but if it means that within 5 years we can start attacking the debt and dare I suggest that within two parliaments (As long as Labour don’t get back in.) we could be approaching a debt free country. We may even be able to start investing in things again.
Anyway the headline figures of today’s report are:
Increase VAT 20%
Widely expected, and a good tax to bring in extra revenue as unlike income and capital gains it is very hard to avoid, I also think it is a fair tax as it works on what you spend, therefore if you have a lot more money you will most likely spend more and as VAT is a percentage of price you will pay more. I know that Labour are saying that it is an unfair tax on the poor (As they spend a higher percentage of their money) but at the end of the day the Rich have already had a 10% increase of higher tax rate.
Two year pay freeze for Public Servants paid over £21,000
This may bring out the strikers this summer but I think it is fair, my Company have struggled with cash flow recently and a pay freeze has been mentioned, again it is not nice but it may have the effect of reducing inflation as we try and get out of recession. I have to admit that I thought £21,000 was a low threshold as after all if you only have one income this is hardly a great wage, but I guess that is what is meant by sharing the pain.
Housing Benefit a Maximum of £400 per week
I am slightly shocked that Housing Benefit was being paid out at a rate over £1800 a month anyway. I guess this will make it hard for the Express and Mail reporters in coming months as “Immigrant living in luxury gets £X a month in housing benefit” has been a regular shock feature over the last few years. Personally I have often advocated that social housing should not come in larger than 3 Bedroom houses. (I know this will anger a few people.) But surely 1 room for Adults and 1 each for Boys and Girls is all you really need?
Parents back to work when youngest child starts school
I do believe that getting parents back into the workforce quicker is a key element to financial stability, Personally to achieve this I would like to see universal free child care, but I guess instead they will simply look to force parents back into the workforce when their youngest is 5, I have a cynical feeling this may lead to an increase in 4 year age gaps between siblings. (As the current system has increased the amount of siblings born over 16 years apart.) Well as long as there is a marked increase in jobs available where the hours are between 10am and 2pm I guess this will work.
Extra £2bn a year tax on the banks
I guess this was inevitable as the Banks are the villains of the 21st Century, I think the amount mentioned will be easily absorbed by the banks (rather than being passed on to us.) As a general rule I do not like a tax that picks on a particular industry as they always seem like petty vengeance for alleged wrong doings, after all I would argue that the “credit crunch” would never have happened if people were not so greedy that they took money they could not afford. However blaming the Banks stops people having to reflect on themselves.
There were also a few small bits of good news
Raise Personal Allowance
The Personal Allowance is going to be increased, This is a incremental step on the way to the Lib Dem election pledge to raise the threshold of Income Tax to £10,000, this will obviously help all tax payers but obviously will mean the most to the lower rate tax payers so should be some help to the less well off.
2 Year Council tax Freeze
This will help all council tax payers, and along with the Public Sector pay freeze (Without which it would probably not be possible) and no increase on Fuel duty should have an effect to keep inflation under 3%. However when you look at the percentage of tax that is actually council tax, it is really just a token gesture.
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