Tuesday, June 22, 2010

Value Added Fairness from Lib Dems to counter VAT rise

Before I even say anything about the Budget, I have to say a huge thank you to the lovely elephant, whose well-timed publication of his review of last Saturday's Doctor Who, during the Budget speech, calmed me down a lot after Osborne had sat down. Clever elephant, and thoughtful Daddy Richard!

I've had a few hours to look a bit more at the details, and on balance, it's better than I initially thought. There's a lot of Lib Dem wins in there, so, thank you Almighty Vince for coming up with them in the first place:

- raising Capital Gains Tax (although not by as much as we would have liked, but this Coalition is a work in progress)

- the flat rate public sector pay rise of £250 for those earning less than £21000

- taking 880,000 people out of tax by raising the personal allowance by £1000 with a commitment to working towards £10,000 over the Parliament. That will start the process of freeing people from the awful poverty trap.

- restricting tax credits for higher earnings and giving more to those who need it with an extra £150 to those on low incomes.

- restoring the pensions/earnings link

- keeping the structure of Child Benefit intact, albeit frozen for 3 years

- a bank levy

- no tax break for married couples - it was only £150, but the principle was so, so wrong. It's in the long grass for the moment which has to be a good thing.

I don't think these things would have been included if the Tories had been in power on their own - and they do make things fairer.

There is some stuff which I don't like. The VAT rise, for a start. It would be much clearer and fairer to have taxes on what people earn rather than what they buy. In fact it was this significant increase in VAT coupled with a significant cut in Corporation Tax, by 4% in 4 years which turned the air blue here for a while. It seemed to me that huge giant corporations like Tesco, who earn squillions in profits, were getting a tax cut. I still don't like it, but I've made my peace with it. Ish. Let's look at what Osborne actually said:

But if we are to have a sustained, job-creating recovery, we need more than that. We need to see growth not just in one corner of our country, nor in just one sector, for we live in a world where the competition for business is growing ever more intense. I want a sign to go up over the British economy that says “Open for business”, and this is how I propose to do it. Corporation tax rates are compared around the world, and low rates act as adverts for the countries that introduce them. Our current rate of 28p is looking less and less competitive, so we will do something about it. Next year we will cut corporation tax by 1%, to 27p in the pound, the year after we will cut it again by 1%, and again the year after, and again the year after that—four annual reductions in the rate of corporation tax that will take it down to just 24%. That will give us the lowest rate of any major Western economy, one of the lowest rates in the G20 and the lowest rate that this country has ever known.

If you are going to make every single department of Government cut its budget by a quarter over 4 years, then people are going to lose their jobs. Making it easier and cheaper for private companies to invest in this country, and using the regional growth fund to make sure that the whole country benefits, not just the south east, will surely mean that these people will find it easier to find new jobs. I suppose that's why we have to swallow that silly Tory plan to get rid of the employers' contribution to the NI rise.

A word about the Health in Pregnancy grant. I looked this up - I had no idea that every woman, regardless of income got £190 after 25 weeks of pregnancy. I won't shed too many tears for the passing of this one - it does seem like a luxury we can't afford.

However, I am more concerned about the restriction of the Sure Start Maternity Grant to the first child. This £500 is to help those on income based benefits buy all the bits and pieces you need for a baby. And if you ever have, you'll know that £500 doesn't really go very far. Things get trashed, or break, so it's quite possible that a subsequent child, born several years down the track, could not use the cot or pram brought for the eldest sibling. Add to that the fact that you really need to replace the cot mattress for every child for safety reasons. It's only around £40, but that's a lot to find out of a tight household budget.

It's two other benefit changes that really make my eyes water and we're going to have to keep a really careful eye on how they affect people. Firstly, the reforms planned for Housing Benefit, which are:

" * re-setting and restricting Local Housing Allowances
* increasing deductions
* reducing certain awards
* time-limiting the receipt of full Housing Benefit for claimants who can be expected to look for work
* restricting Housing Benefit for working-age claimants in the social rented sector who are living in a larger property than their household size warrants
* new maximum limits on housing benefit: from £280 a week for a one-bedroom property to £400 a week for a property of four or more bedrooms
* re-adjusting Support for Mortgage Interest (SMI) payments - currently 1.58 percentage points above the Bank of England Base rate; from October 2010 SMI will be paid at the Bank of England’s published Average Mortgage Rate"

The two in bold are for me the scariest. Imagine you live in a 3 bedroomed Council House. You and your partner have lived there for 20 years, since you got together and have 2 children, a boy of 18 and a girl of 13. So, each bedroom is occupied. Your son leaves home to go to uni, or maybe to join the Army and fight in Afghanistan. As soon as he moves out, you technically only need 2 bedrooms, and if for some reason you would need to be rehoused by the Council, would only be given a 2 bedroomed house. Imagine that the main/sole bread winner loses their job (maybe as a public sector worker) 6 months after the son moves out. The family would only get a proportion of their rent paid, whereas at the moment they would get it all. What are they supposed to do? Move? Out of the house that they have lived in all the children's lives? I can see a situation where they could have real trouble paying all of their rent. What happens if neither adult can get a job? How soon will they lose their entitlement to Housing Benefit if it's to be time restricted? I worry that poor families could be vulnerable to homelessness through no fault of their own.

You would also think that a £400 per week cap on Housing Benefit would be sufficient for a 4 bedroomed house. Maybe not in London, though. Look at this showing rental property in London. A few fairly ordinary looking houses charging that much for rent. There is a chronic shortage of social housing, forcing many poor families into the private sector to rent houses they can't really afford. Most of them aren't paying £400 per week or anything like it, but I'd like to know who is being paid that and why before I can honestly say I support that restriction.

And finally, the changes to Disability Living Allowance. A medical assessment. Heavens, you have to be pretty disabled to get it. Many who claim it are never going to recover sufficiently to work. Also, we've seen how Labour made a pig's ear out of the employment and support allowance medicals, where the initial test has marked people like Cancer sufferers as fit to work. You then have to go through a complicated and stressful appeals process and suffer financial hardship in the meantime. 40% of those appeals are successful. Already people are being turned down for DLA too often and too arbitrarily. I am fairly convinced that this move is going to cost more than it saves, in terms of human hardship as well as money.

This Budget could certainly have been worse. It is definitely a lot fairer than it would have been without the Liberal Democrats there and has started to move towards our goal of hardwiring fairness into the tax system.

And do remind the Labour Party that one of their first acts in Government was to restrict benefits for lone parents. That should wipe the smug smile off their faces.

1 comment:

Gavin, Leeds said...

Its fantastic how you justify the Lib Dems decision to sell out to the Tories for a small taste of power. The budget was a Tory budget from beginning to end. Cuts, Freezes, Tax Rises and broken promises. Targeting the worse off and the public sector. Dont kid yourself, Clegg and Co. are nodding dogs no more. There is no Lib Dem influence in this budget and they should be voting against it. They wont of course as this would jepordise their only chance of being seen as relevant and important in British politics. They have badly let their voters down.


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