As the sun has moved across the equator into the Northern hemisphere to announce the start of a new season, the Chancellor of the Exchequer announced the nation’s Budget for the year to come. As austerity measures have failed to generate economic growth, the aim of this year’s Budget is to kick start the economy. Although accountancy is not considered the sexiest profession in the land all eyes are on the nation’s bookkeeping to see what’s in it for them. This year’s biggest bombshells are the cut of the 50p tax rate and the tax increase for pensioners, the so-called granny tax. To make it not look like Osborne is giving the rich a tax break subsidised by pensioners, the tax-free personal allowance is to be increased by £1100 to £9205. Happy days for workers and especially those on lower incomes. Yet, like in life, not all is what it seems. More welfare cuts have been announced likely to throw more people below the poverty line. Also many tax credits are to be cut outweighing the benefits gained by the increase of the tax-free personal allowance resulting in some household not gaining anything substantial or even being worse off. The Treasury argues that the 50p tax rate for the wealthiest segment of society, introduced by the previous government, is not bringing in any substantial revenue as the wealthy have been creative with their numbers by finding themselves all sorts of lucrative tax loopholes. Some of these loopholes have been closed and with a lower top tax rate the rich are more likely to pay their taxes the argument is. If this will indeed be the case remains very much to be seen.
A rather odd feature of this year’s Budget is the so called granny tax. I wonder how clever this move is. As pensioners tend to exercise their right to vote and when they do, vote Conservative, the Tories are not really looking after their electorate very well. If you have worked hard all your life to enjoy the small fruit of your labour, do you really deserve an even (slightly) smaller fruit in the autumn of your existence? With a cut in corporation tax and the cut in the top tax rate the Chancellor aims to attract more business and investment into the country to generate that growth we have been deprived of for a few quarters. However, since the majority of Tory front benchers and their mates are millionaires, it also very much looks like looking after one’s own. An increase in stamp duty on residential dwellings of £2 million or more, the so-called mansion tax, is supposed to compensate this tax break for the rich. The tax break for top earners is to result in economic growth of….drum roll….0.1, yes, nought point one percent! As one expects little change on the short term in the employment figures, the Budget is doing shockingly little to actually create more jobs.
The Conservative Party has often been accused of being a bunch of rich folks out of touch with ordinary people exercising political power for the wealthy. Now, it is easy to bash the rich, especially in times of austerity. People are not their income. Many rich people work very hard for their wealth and many wealthy folk do their bit for society in whichever form they see fit. Being rich does not automatically mean you don’t have compassion for people who have an awful lot less than you. However, presenting a Budget which is supposed to be a coalition effort, in which the government put even more pressure on the poorest in society, give with one hand to and take even more with the other from the squeezed middle, while giving the rich generous tax breaks to create minuscule economic growth and even less jobs, smells indeed of a bunch of out-of-touch millionaires, who are running a show merely for their own and their mates’ benefit and entertainment.