I have only just managed to get anywhere near blogging on the budget due to demands of broadcasters so for a moment I'll stick to my political reactions to what was said and ignore the detail.
This was a deeply political budget - and a failed one at that. The 45p tax rate is a gift to Labour. If the 50p tax rate raised no money then it deserved to go. But as I'll show later - even the OBR said it should have raised money and in that case they had to keep something or lose too much case - so they compromised on 45p. That's an admission that higher rates work but they wanted a give away to the rich anyway. My estimate of the giveaway - well that remains at around £3 billion. I'll come back to this later.
Re the supposed extra tax on the rich - this is simply an increase in stamp duty on houses over £2 million. Sure that taxes the rich but it is so arbitrary that it undermines the principles of any good tax system - not least Adam Smith's which Osborne quoted. Suggesting it's fair to pay more tax because you're mobile has no logic to it at all.
As for the supposed crack down on tax avoidance - that's Graham Aaranson's general anti-avoidance rule which specifically says it is no such thing and is intended to allow all tax avoidance bar the very most offensive to continue unimpeded, plus the UK- Swiss tax deal which far from being na anti-avoidance measures specifically permits continued tax evasion by those UK residents who have used that country's tax system for criminal purposes.
In other words this was a tax give away to the rich.
Middle Britain will gain too. The increase in the personal allowance is worth far more to them - up to Almost £900 for some households as opposed to the £200 or so for the average household Osborne highlighted. And for marginal households this can have serious impact in the loss of tax based credits that will mean there is little or not gain for those on very low pay and the margins of employment. Which makes it another own goal.
The child benefit reforms are a massive complication to the tax system for a so-called simplifying Chancellor, needed to dig him out of a hole. Thousands more households will need to do tax returns to get that one right, and will resent it when they owe many back as a result. Another own goal for Osborne!
That wasn't the only own goal he had to dig his team out of - the oil tax changes were a slap in the face for Danny Alexander's ill thought out reforms a year ago.
But most amazing was Osborne's desire to shoot himself in the other foot politically, Having alienated parents on child benefit last year this year he's chosen to alienate an even bigger lobby. He effectively announced another increase in state retirement age and at the same time said pensioners will have to pay more tax in the future. So that's the grey lobby he's lost, in its entirety. It's an astonishing faux pas and almost certainly the biggest political gaff of this budget.
Although he has tried others. Budget statement paragraph 2.207 announces an attack on personal services companies. There may be a million of them in the UK - all natural Tory voters. That's the small business lobby who will be spitting fire at him.
And did he do anything good? Yes, rail investment. That does it for me. After that? No. Nothing at all. It was a give away to big business by cutting rates and the tax base - the subsidy about £1.5 billion a year with no equivalent for small business, job creation, demand generation or a single measure of hope for most of the unemployed.
As for the £10 billion to be cut from welfare - well, heaven help you if you're sick in future if you can't reach your retirement age in your early 70s - because George is saying if you can't work until you drop - well, you can starve instead.
This was a callous, dishonest, really rather nasty budget that was, however, full of elephant traps that should be a gift to a competent opposition.
I hope they're stepping up to take on the challenge.
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Maybe Osborne isn’t concerned about the grey vote because re-election isn’t one of his aims. I’m coming round more and more to the idea there won’t be one in 2015, they’ll just widen the Coalition to include the two Eds and rule in perpetuity. After all, if they decided to do that, what could the rest of us do?
One thing I find totally unrealistic is how the Budget assumes that there is going to be a substantial growth in business investment, for which they seem to be relying on for growth together with other better run economies, when practically the only stimulus they give is a reduction in corporation tax rates, with next to nothing apart from a bit of tinkering encouraging direct investment.. Don;t they realise that the UK Corporate sector is sitting on a substantial surplus with precious few sticks or carrots to make it invest.
You comment that the increase in the personal allowance will mean a benefit of up to £900 in some households. Surely this figure would only apply to a household which contains 4 individuals all of whom are earning enough to benefit from the raising of the threshold. There may be some households somewhere in the country in this category but is this, by any means, a typical household in the UK.
How many households in the Uk have 4 individuals earning more than the personal allowance? Is the number significant? Meanwhile, as so many people are informing us that there is pressure on the housing market through lack of affordable housing etc., would it not ease the pressure if people did actually live in larger (in terms of numbers of residents) households and would it not, therefore, make sense to encourage such a process through the tax system.
You ignore the benefit will be at 40% in many cases
I suspect your days of posting here are going to end soon, to save you the embarressment
Once again you respond with aggression and antagonism towards questions. It is clear to any objective and rational observer that my question related how pertinent your comments were in relation to how typical or common the situation you describe might be.
As far as the 40% rate is concerned, the raising of the threshold for the personal allowance by £1100 means an obvious reduction in annual tax of £220 at a rate of 20% – has the threshold for the 40% been changed correspondingly in the budget? I didn’t notice that. Please inform me if I missed it.
Yes it has
And I assume you’d bother to check before commenting
If you don’t – you get what you deserve
I am reasonably emitted to assume I am dealing with informed commentators and not those I also have to spoon feed data to
“a callous, dishonest, really rather nasty budget that was, however, full of elephant traps that should be a gift to a competent opposition.”
Just a shame we don’t have a competent opposition.
They may well step-up….but their current leader is undecided whether he is, or not: a leader that is.
Personally, I view Mr E Milliband as the modern-day equivalent of a certain Mr Kinnock. Nice, but unelectable.
For him, and Labour, to be elected the current “team” must turn out to be totally incompetent and alienate practically all the print media along with the broadcasting media.
But then, people have such short memories.
And then there is the electoral boundaries shuffle….how many safe Labour seats will be split to make marginals ?
But one thing’s pretty sure, Richard. The Tory party can expect donations from big business and the feral rich to come flooding in after this. I’d say they can now count on having enough in the coffers to launch a US (Republican) style PR campaign that takes us all the way to the next election, drowning out anyone who seeks to speak truth unto power (and the Lib Dems) in the process.
PS
Are you informing us that some individuals will gain more than £220 per annum from the increase in the peronal allowance?
Yes – because they will!
It’s extended to those on 40p tax rate
So mathematically I’m telling you what has to be true!
The 40p threshold has been reduced by more than the PA has been increased, so this is incorrect.
I presume your £900 is calculated by taking two earners and removing the tax from £1,100 (each) of higher rate earnings. This won’t happen. I think that the impact becomes negative once someone hits higher rate (though I saw an article earlier that suggested there was still a £42.50 benefit, but I can’t see where they got that.. perhaps there’s an NI impact they are taking into account, I’ve not seen what’s happened to those thresholds yet)
Look – I haven’t checked the detail – but Osborne says what you’re saying is wrong – and budget notes certainly imply that
Well, with respect, shouldn’t you check before making such assertive representations?
Table B.1 of the budget document illustrates the Income Tax and National Insurance effects of the budget. At £40,000 someone is £170 better off, at £50,000 they are £40 better off, which stays all the way through to £100k.
Hang on – is that for this reason alone?
It (should be) the cumulative impact of the various threshold changes, and whatever is happening to NIC thresholds. There are no rate changes at these points, and it can’t include the revised child benefit withdrawl rules.
As I said, I did a quick income tax only calculation and got higher rate taxpayers as being worse off – because the PA threshold rise is mainly offset by 40% tax kicking in earlier. I’ve checked my sums, and I’d compared to the 11-12 HR threshold, not the 12-13 one.. correcting that means a £15 ‘advantage’ on income tax, so NI must make HR taxpayers a further £25 better off.
Osborne did talk about some of the child benefit saving staying with higher rate taxpayers, so perhaps that’s what he’s referring to. As a childless HR taxpayer, I thoroughly approve 😉
I’ll check this tomorrow
And if I’m wrong – I promise I’ll say so
I can eat humble pie!
This is strange. I have just been on the website of Mortgage Solutions which states that the small print in the budget is stating that the threshold for the 40% rate of tax is being, in effect, reduced thus catching an estimated 300,000 people. They say that people in this category are not going to benefit significantly from the increase in the personal allowance.
Can you inform us in detail (sorry if I have to be spoon fed but you can see there is conflicting evidence) what has happened to the threshold for the 40% rate?
Which is specifically not what Osborne said, and the budget reports says they will ebenfit – although not in full
You tweeted “How will Osborne ever collect tax from unknown foreign companies. I await the details. And the prosecutions of many owners of them” Well they can’t take the house abroad, so it could be sold to pay the stamp duty, fines, interest etc and produce another stamp duty bill on the sale. I think they might cough up.
But will we know who they are so they can be prosecuted if the money used to but the property was laundered?
That’s key to me
Doesn’t matter,. Make the fines big enough and there won’t be a lot left over. They’ll queue up to pay and answer questions.
You are correct, it is going to be very hard to ascertain ownership.
PS
The headline in Mortgage Solutions states :
“Hundreds of thousands of basic rate taxpayers will fall into the 40% income tax bracket when the government lowers the threshold next year.”
This contradicts your previous comments. Who is correct?
I know you referred to “informed commentators” but it is quite difficult to be an informed commentator when information is so contradictory.
Talking of elephant traps, I think you should be careful in landing in one yourself.
If the revenue raised is indeed five times more from the “rich” than the drop in 5% marginal rate relief as the Chancellor claims, your arguments fall down. Then who cares what the rate is?!!!. OK I know that is not going to happen, I know just how incompetent HMRC are. But even if it were say only ,1.5 times the revenue, the Chancellor’s argument probably holds.
But as we both know the real test is how the economy moves now. There will always be millionaires, tax dodging or not. If it does move well then this Budget will be appear to be vindicated and your assault will look silly. The Budget is broadly neutral, don’t make it overimportant, I feel you are making it so.
It is not revenue neutral
I’m saying that is untrue