The Budget statement of 2012 may go down in history as a highly controversial one. At a time when many middle and lower income earners are struggling …
The Budget statement of 2012 may go down in history as a highly controversial one. At a time when many middle and lower income earners are struggling with pay freezes, job losses, benefit cuts and the impact of inflation, those paying the top rate of tax have had this cut from 50p to 45p.
Of course, if spoken of only in those terms the whole thing may seem highly unfair, although this was just one announcement in a lengthy speech covering not just personal taxation but also spending, borrowing and various measures being taken in a bid to bolster the economy.
For those who are struggling financially – which may be made worse through having debt management issues – one key concern is whether the measures taken will ultimately boost the economy, as growth is what will bring jobs, more wealth and therefore the greater earnings that can improve personal finances in the longer run.
And there was much in the speech about enterprise zones, corporation tax, the development of science and technology and plans to improve exports by focusing more on producing the goods emerging economies like Brazil, Russia, India and China will buy.
However, for those whose need for improved finances is urgent, jam tomorrow will not do.
One announcement that may be seen as positive is the increase in personal allowances. These are already set to rise by £630 to £8,105 next month. Mr Osborne then announced it will be increased by the largest ever amount in a single year – £1,100 – to £9,205 next year. This will reduce tax for basic rate payers and take many lower earners out of taxation altogether.
The plan – originally conceived by the Liberal Democrats but quickly accepted as a coalition commitment – was to raise this to £10,000 over the course of the parliament, but the chancellor said he wanted (perhaps under strong pressure from Mr Clegg's party) to go "further and faster" towards it.
However, this has been condemned as a red herring by Citizen's Advice (CAB) because for many, the benefits of the raised allowance will lead to people being penalised through the benefit system.
Describing the raised allowance as an "empty gesture", CAB chief executive Gillian Guy said: "Poorer working families who get housing and council tax benefits will not get all of the money in their pocket – because as their income goes up, their benefits will go down. The government must make sure the poorest feel the full financial impact of this raise by changing the levels of disregarded income when calculating benefits."
Examining this issue, Robin Williamson, the technical director of the Low Incomes Tax Reform Group, calculated that the raised allowance may benefit a lot of people, but only "ameliorate" the losses felt by those who have lost out on benefits.
He suggested that for those on housing benefit and council tax benefit, the likely effect will be for only 15 per cent of the "theoretical" gain to actually reach their pockets.
So for people struggling with debt, the benefits of the Budget may be limited and this may act as a reminder that the best thing to do is always to seek help and advice as soon as possible.
By Joe White