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Published on March 21st, 2012 | by Robert Bickers
Image © [caption id="attachment_9237" align="alignleft" width="255" caption="Copywrite Robsam"][/caption] Today the Chancellor George Osborne stood at the dispatch box of the House of Commons to formally reveal the government budget for the year. He promised that it was a growth budget and that by being ‘unashamedly on the side of business’ growth will increase. In this tax-centric budget however was Osborne actually unashamedly on the side of the rich? Osborne started by revealing the Office for Budget Responsibility’s (OBR) growth and debt forecast. The news on this front was surprising optimistic, with projected growth this year being revised upward. Unfortunately for us all the figure for this year is only 0.8% and the projected deficit for this year is £126 billion- demonstrating the magnitude of the problem. In terms of welfare changes the Chancellor announced that there would be a further review of welfare policy as even after the government’s changes it would still account for one third of government spending. He suggested that there would be a further £10 billion more cuts by 2016 achieved partly by a pension age that tracked life expectancy. Osborne argued that infrastructure investment was a key element of economic growth but did not announce significantly more public money. Instead he outlined plans for pension funds to invest in UK infrastructure projects and stated that planning rules would be relaxed with a ‘presumption in favour of sustainable development’. Reforms in Taxation policy dominated the budget with significant changes at both the high and low ends of income scale. The budget started with a statement that there would be more tax on the rich and less on the poor. Reforms in Stamp Duty represented a sort of mansion tax with the rate on houses over £2 million increasing to 7% and a clamp down on using companies to avoid paying it. The headline changes in tax were to increase the personal allowance to £9205 and to reduce the 50p tax rate to 45p by April 2013. These changes represent tax cuts for the working poor and the rich. Despite other changes to increase taxes on the rich it is clear that this change will give money away to the rich at a time it cannot be afforded. It remains to be seen whether the other changes will raise enough to compensate for the loss of income from reforming the 50p rate. Income tax reforms were not the only important changes in the budget. As part of the government’s pro-business agenda corporation tax was cut to 24%. In terms of duties Alcohol was unchanged with no minimum price being introduced, tobacco was increased by 5% above inflation and fuel duty was not frozen meaning that the 3p August rise will go ahead. Osborne’s main argument is that this tax cutting budget will put money back in the hands of those who need it most i.e. those who are the lowest owners and struggling companies. Also he argues that cutting the top rate of tax is no give-away for the rich as the money will be got form the rich in other ways. The Labour Party argues that due to the changes in working tax credits the poor will be worse off. They also argue that the reduction of the 50p rate represents a government bonus for bankers as it is cutting their income tax. They agree that measures such as raising the amount of stamp duty on £2 million houses is a good idea but argue that the money raised should not be focused on reducing the 50p tax but helping the squeezed middle. Overall this budget despite having some very good measures makes unnecessary tax cuts for the rich. It is good to raise the personal tax allowance and cut down on tax avoidance but reducing the 50p rate in my opinion is a bad idea. Doing so will both harm attempts to reduce the deficit and is not fair as high earners should make more of a contribution.

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Budget 2012

Copywrite Robsam

Today the Chancellor George Osborne stood at the dispatch box of the House of Commons to formally reveal the government budget for the year. He promised that it was a growth budget and that by being ‘unashamedly on the side of business’ growth will increase. In this tax-centric budget however was Osborne actually unashamedly on the side of the rich?

Osborne started by revealing the Office for Budget Responsibility’s (OBR) growth and debt forecast. The news on this front was surprising optimistic, with projected growth this year being revised upward. Unfortunately for us all the figure for this year is only 0.8% and the projected deficit for this year is £126 billion- demonstrating the magnitude of the problem.

In terms of welfare changes the Chancellor announced that there would be a further review of welfare policy as even after the government’s changes it would still account for one third of government spending. He suggested that there would be a further £10 billion more cuts by 2016 achieved partly by a pension age that tracked life expectancy.

Osborne argued that infrastructure investment was a key element of economic growth but did not announce significantly more public money. Instead he outlined plans for pension funds to invest in UK infrastructure projects and stated that planning rules would be relaxed with a ‘presumption in favour of sustainable development’.

Reforms in Taxation policy dominated the budget with significant changes at both the high and low ends of income scale. The budget started with a statement that there would be more tax on the rich and less on the poor. Reforms in Stamp Duty represented a sort of mansion tax with the rate on houses over £2 million increasing to 7% and a clamp down on using companies to avoid paying it.

The headline changes in tax were to increase the personal allowance to £9205 and to reduce the 50p tax rate to 45p by April 2013. These changes represent tax cuts for the working poor and the rich. Despite other changes to increase taxes on the rich it is clear that this change will give money away to the rich at a time it cannot be afforded. It remains to be seen whether the other changes will raise enough to compensate for the loss of income from reforming the 50p rate.

Income tax reforms were not the only important changes in the budget. As part of the government’s pro-business agenda corporation tax was cut to 24%. In terms of duties Alcohol was unchanged with no minimum price being introduced, tobacco was increased by 5% above inflation and fuel duty was not frozen meaning that the 3p August rise will go ahead.

Osborne’s main argument is that this tax cutting budget will put money back in the hands of those who need it most i.e. those who are the lowest owners and struggling companies. Also he argues that cutting the top rate of tax is no give-away for the rich as the money will be got form the rich in other ways.

The Labour Party argues that due to the changes in working tax credits the poor will be worse off. They also argue that the reduction of the 50p rate represents a government bonus for bankers as it is cutting their income tax. They agree that measures such as raising the amount of stamp duty on £2 million houses is a good idea but argue that the money raised should not be focused on reducing the 50p tax but helping the squeezed middle.

Overall this budget despite having some very good measures makes unnecessary tax cuts for the rich. It is good to raise the personal tax allowance and cut down on tax avoidance but reducing the 50p rate in my opinion is a bad idea. Doing so will both harm attempts to reduce the deficit and is not fair as high earners should make more of a contribution.

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