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Our budget review

BY BLOC 26/03/2016

This was the 16th budget (or equivalent) since the Tories entered government in 2010 & was billed as a budget for the future generation by George Osborne, in reality Jeremy Corbyn's response was closer to the truth: ‘This was a budget with unfairness at the core’. Osborne is failing miserably, even on his own terms; he is £140 billion short of his target for growth set in 2010 & public debt has risen at least £460 billion since he became chancellor. The rest of the country can only dream of being that bad at their job & still be paid for it 6 years later

 

This has turned out to be one of the most controversial budgets in recent history; voted in with a majority of just 35 & a key front bencher resigning, allegedly, as a result of it. The Tory record with the economy is slowly unravelling & their incompetence is being revealed. As usual, we provide our response to the budget:

 

How many economic statements do we need?

This was Osbornes 8th official budget but take into account his economic statements & he’s up to 16. Do we really need this many? The autumn statement only took place in November & already we’re ripping up that in favour of a new one. We’d like to see a yearly budget with no economic statements in between unless absolutely necessary e.g. a sudden, unforeseen change in the economy

 

Swapping and changing so many times allows Osborne to play the media; swinging from one minute where we are in a ‘strong economic position’ to just months later where the ‘economy is smaller than we thought’ - do away with the rigmarole of constant statements which seem only to serve as a way of the government cutting spending quicker and dress up their failures more regularly  

 

Sugar tax

Osbornes big political story & in reality a great toe in the water for combatting obesity in this country but not far enough as far as were concerned. The same tactic has been tried in other countries, largely to no affect - in Denmark it was dropped after just one year. The Institute for Fiscal Studies (IFS) say that a more sensible approach would have been to put a tax on each gram of sugar rather than on each litre of the drink e.g. a 3 litre drink will be taxed more than a 2 litre drink even if they contain the exact same amount of sugar. If people really have a taste for sugar, they’ll simply turn to chocolate or confectionary. While a good start, we feel that stronger regulations on the industry would actually combat obesity - this seems nothing more than a money making scheme

 

Financial impact of the 2016 budget per household - average change in annual family income

MAIN50days Screen Shot 2016-03-24 at 22.09.01

Tax allowance

George Osborne showed his true colours in this budget. The constant theme that ran through it was that the economy is smaller than we thought & we must live within our means, this was given as the reason for further cuts to the welfare budget. Despite all this he threw in a tax cut for the richest, with the 40p tax threshold set to rise to £50,000 by 2020. The Resolution Foundation say 85% of the benefits of this move will go to the richest 20% of households

 

Osborne threw in an increase to when earners will start paying income tax to £11,500 but its not the great give away it seems. Its nothing more than a sweetener as the IFS say it will do nothing to stop the bottom 20% of earners losing up to 12% of their income by 2019. The real winners, once again, are the richest in the country - proof we are not all in this together. In the increase in wealth Britain saw from 2000-2015 just 7% went to the poorest 50% while 26% found its way in to the hands of the richest 1%. Its clear that years & years of money being diverted into the hands of those at the top has not worked economically so why do this government persist in that tactic?

 

Education

Osborne shocked most people by announcing all schools are to become academies. He has received a backlash from Conservative councillors & teachers who are just the latest in a long line of professions demonised and undermined by the Tories

 

This takes accountability away from schools & shockingly all the evidence points towards them failing. According to the Local Schools Network ‘sponsored academies underperform compared to non-academies. At both primary and secondary level they are more likely to become, or remain, "inadequate" and their results, on average, increase at a slower rate. On every measure, at primary and secondary level, schools perform better if they remain in the maintained sector rather than become sponsored academies’. To delve further into their quote: Ofsted results show that schools are twice as likely to become “inadequate” if they are sponsored academies. This move seems nothing more than good old fashioned Tory class warfare to us: decent education should only be saved for the most privileged. There is a serious shortage of teachers in the UK & worrying signs of dissatisfaction amongst the teaching community - if the government really cared about education these are the areas they should have looked to combat

 

Corporation tax

Thatcher inherited a corporation tax rate of 52% in 1979, by 1997 it had fallen to 31%. Osborne has continued the trail left behind by his predecessors as he inherited a 28% rate in 2010 & after cutting it to 20% last year has decided that isn’t enough: by 2020 it’ll be 17%. Thats right, by the end of this government, corporations will be paying a lower tax rate than most of you reading this right now. A major argument is that this will benefit smaller businesses which we welcome, we should be supporting these type of homegrown small companies. However, it is does not send the right message to the bigger businesses - it sends home the continual line from this government that they are happy to see bigger businesses pay less. Bigger businesses should be paying a higher tax rate & tax avoidance loopholes should be properly closed (not the meaningless attempt in every budget)

 

Capital gains tax

The two rates of capital gains tax (CGT) are to be cut by 8% each; the higher from 28% to 20% and lower 18% to 10%. CGT is charged on the annual profit made from the sale of assets - such as a business, a second home or shares - if that total profit is greater than an individual's current CGT allowance. According to David Kilshaw, of accountancy firm EY, ‘The chancellor's cut to the headline CGT rates will be a shot in the arm for the stock market, with investors in stocks and shares being the main winners.’ Clearly these are the groups of people who have had it tough of late, the exact sort of people who need a tax break. Another tax break for the rich

 

Flood defence

The government have responded to the heavy criticism last year for under-funding of flood defences which devastated our base, Kirkstall in Leeds, and many other areas across the country. A £700 million increase in flood defences is a welcomed move but how we will pay for it isn’t. Osborne revealed ‘I am going to increase the standard rate of Insurance Premium Tax by just half a percentage point’, which may be true (it is to rise from 9.5% to 10%) but he had already increased it by 3.5% in the autumn budget meaning it has now risen from 6% to 10% in just 4 months. As we warned back then, joined by many in the business, it could see many people be deterred from taking adequate insurance. While we want more funding for flood defences, it is hard to see how it is fair to pass this cost on to everyday household bills which are already stretched. Surely the tax break for the rich, corporation tax or capital gains tax would have helped fund this?

 

Osborne has also presided over one of the most anti-green governments in modern history - if he really wanted to combat the floods then he’d be flowing money into combatting the affects of climate change, rather than penalising the use of green energy

 

ISA changes

People will now be able to put £20,000 into an ISA with tax-free interest, a rise of just under £5000. Excellent news for savers however there are very little of them anymore thanks to the ineptitude of this government. This policy shows just how out of touch Osborne & this government are with the rest of the country. 9 million people do not have any savings; 40% have less than £500 saved; 2.6 million in full time work don’t even earn enough to cover all their bills. The majority of working Britons are struggling to cover the basic cost of living, never mind putting money away to save, let alone £20,000. We are not discouraging the move per se but feel that changes need to made so people can live before saving, just a few examples; introduce living wage as the minimum wage; combat housing crisis; renationalise railways to lower travel costs. The other worry we have with this is that the Tories are pushing people into saving as they sense another financial crash on its way. All the signs point toward this at the moment & rather than tackling it they want people to have something tucked away to cover it themselves