By David Burridge, Economics Editor
“Britain is going to earn it’s way in the world. There is no other road to recovery” declared chancellor George Osborne as he delivered the 2012 budget this afternoon.
Osborne announced the threshold at which no tax has to be paid will rise to £9205 and the controversial top tax rate is to fall 5% to 45%. He also announced that corporation tax is to fall from 25% to 22% over the next few years and bank levy is to be increased to 0.105%. The budget also saw tobacco duty rise by 5% (37p) as from 6pm today.
These are all attention grabbing headlines but where does this leave the average family?
The answer: you probably won’t notice the difference.
Child benefit is going to be reduced on a sliding scale from £50,000 to £60,000 at which point it stops being paid at all. A reasonably well off family may well see a reduction in welfare received from the state as a result of this new policy, however any family who earns below 50k will be unaffected.
Any individual who is currently on a low-income and pays the lowest band of income tax may well find that they no longer need to pay income tax because of the rise in the threshold to £9205. Apparently this will aid about 2 million of us according to the chancellor.
Some of the tax breaks for families and low income individuals was funded by the scrapping of tax benefits for pensioners. This leaves Britian’s pensioners £1bn a year worse off. New pensioners are set to lose £197 a year while existing pensioners are set to lose £63 per year.
Top tax rate
The top earners will benefit from the reduction in the 50% top tax rate to 45%. The chancellor argued that the 50% rate implemented by the Labour government was ineffective in achieving the revenues promised and severely damaged Britain’s international competitiveness. Whilst this may be true, it doesn’t take away from the fact the rich will have less tax to pay.
The fall in corporation tax to 22% in the future and 24% immediately will be good for business. The chancellor labelled it “an advertisement for investment and jobs within Britain.” This news will be good for the self-employed and small business owners, as well as large corporations residing in the UK. However this rate will not reduce the taxes banks pay as the bank levy is increasing to 0.105%.
Growth was forecast to be 0.8% for 2012, up from 0.7%. However growth next year was revised down to 2% from 2.1%.
All day trading on eight Sunday’s during the Olympics, new faster broadband for 10 of the UK’s biggest cities, £50m to be set aside for faster broadband for smaller cities and a new tax document for each household detailing exactly how their contribution is spent were some of the surprisingly more modern policies included in this year’s budget.
One announcement however will have the chain-smoking population fuming – tobacco duty is to rise 5% immediately form 6pm tonight. That’s an immediate 37p increase in the price of a packet of cigarettes. However alcohol duty will not be rising anymore.
The chancellor concluded with: “This country borrowed it’s way into trouble, now it’s going to earn it’s way out.”
Will this budget really help Britain ‘Earn it’s way out’?
Well as always the proof will be in the pudding.