A Strong Voice for Croydon Central - Gavin Barwell MP
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A Budget that rewards work
21/03/2012 15:53:00

Earlier this afternoon, I was in the House of Commons to hear the Chancellor of the Exchequer deliver his third Budget.

He started with a very good summary of what the Government is trying to do, which I reproduce here:

"This Budget rewards work. Britain is going to earn its way in the world. There is no other road to recovery...It unashamedly backs business. And it is on the side of aspiration: those who want to do better for themselves and for their families. This Budget reaffirms our unwavering commitment to deal with Britain's record debts. But because we have already taken difficult decisions, this can also be a reforming budget that seeks to repair the disasterous model of economic growth that created those debts...to create a more balanced national economy, where financial services are strong, but they are not the only string to our bow".

A few highlights:

First, the forecasts - which under this Government are produced by independent experts from the Office of Budget Responsibility (OBR), not the Chancellor himself - are moving in the right direction. Compared with their last forecast in November, the OBR are predicting marginally stronger growth this year, fewer people claiming unemployment-related benefits and less borrowing, with the Government on course to meet its target for reducing debt as a proportion of our national wealth by the end of this Parliament. One particular striking figure is that a result of the Government's deficit reduction plan and the consequent fall in interest rates, this Government will spend £36,000,000,000 less on debt interest payments than its predecessor planned to do.

Second, the Budget is fiscally neutral ie there is no change of course when it comes to reducing debt. He is sticking to the plan he has set out. But within those overall totals, he has found some extra money for some things, cut a few things, raised some tax and cuts others.

Third, one of the things he has found some welcome extra money for is to improve the accommodation for our armed forces and their families and to increase the financial support families receive when loved ones are deployed to combat zones.

Fourth, he referenced a number of things the Government will do to boost economic growth:

- help small businesses access credit;

- address the lack of airport capacity in the South East;

- reform the tax system to boost investment in the North Sea;

- introduce tax credits for the video games, animation and TV production industries;

- invest in ultra-fast broadband;

- reform the planning system;

- look at loans to help young people start their own business;

- simplify the tax system for small business; and

- help the Mayor of London establish a £70 million development fund to attract new businesses and new jobs to the capital.

Fifth, he proposed a 1p cut in the rate of corporation tax in addition to the one he was already planning to help make Britain one of the most atrractive places in the world to do business.

Sixth, there was a really strong section on tax evasion and certain types of tax avoidance. It's worth quoting exactly what he said as this is an issue that constituents often raise with me:

"My goal is a tax system where the lowest paid are lifted out of tax altogether, while the tax revenues we get from the richest increase...I regard tax evasion - and indeed aggressive tax avoidance - as morally repugnant...We've capped benefits. Now it's right to cap tax reliefs too".

Seventh, he is proposing to reduce the 50p income tax rate to 45p from April next year, keeping his promise not to touch what was described by Labour when they introduced it as a temporary measure until the public pay freeze is over. Ed Miliband, responding to the Budget on behalf of Labour, focused on this issue. But let's look at the facts:

1. no other major economy has a marginal rate of tax this high - it sends out all the wrong signals to people who are considering investing here;

2. it has only raised a third of what Labour said it would raise; and

3. the independent experts say cutting it to 45p will only cost £100 million a year. That's just a fifth of what the Chancellor is raising from the rich through other measures in this Budget. What matters is not tax rates but what proportion of the money the Government raises in tax comes from people of different incomes. Very high tax rates both damage our economy and are ineffective in that they raise next to nothing.

Eighth, the Chancellor has tried to address at least one of the problems with his proposal to remove Child Benefit from higher-rate taxpayers, namely that people who are just below the higher rate threshold would actually be worse off if they received a pay rise. He is now proposing that you wouldn't lose anything until you earnt over £50,000 and then you would lose 1% of your Child Benefit for every extra £100 you earnt ie only those over £60,000 would get nothing. This doesn't deal with the second problem - namely that a family with one person earning £61,000 gets nothing but a family next door with two people each earning £45,000 still gets Child Benefit - but there is no way of solving that without an expensive means-testing system.

Finally and best of all, the Chancellor is going to increase the income tax threshold - the level of income at which you start to pay Income Tax by £1,100 next April in addition to the £630 increase already scheduled for this April and the £1,000 increase introduced last year. As a result, people will be able to earn up to £9,205 before they have to pay any tax. 24 million people earning less than £100,000 a year will gain and as a result of these three increases people working full time for the minimum wage will see their income tax bill cut in half.

All in all, a good package of measures. Let me know what you think.

Comment on this blog


Readers' Comments

On 02/04/2012 17:08:00 Mrs J Reynolds wrote:
Hello Gavin

In your summary of the budget I didn't see any mention of the age related tax allowance that will be frozen for pensioners. I would like you to fight for us to get that changed. My husband and I have worked hard all our lives and have always voted Tory but unless this decision is changed you will no longer be able to count on our vote. We cannot see why the pensioners had to be picked on.


Jo Reynolds

On 02/04/2012 20:36:00 g Layzell wrote:
When will we start to pay off our national debt? Soon I hope. Why not just have a fixed rate of tax - it is simple to work out, simple to collect and then you cab sack all those leeches on society called accountants. They do not make anything, they just earn a fortune using all legal ingenious ways for people not to pay tax. Someone I know laughed at me stating "You pay more tax in a month than I do in a year, my accountant protects my money". With a fixed rate of tax no matter what the income these billionaires would have to pay into our society, no more no less by percentage rate than the poorest contributor. When the national debt is paid off then you can bring in personal allowances to take the poorest out of tax all together.
On 14/04/2012 17:50:00 Mr Barker wrote:
What surprises me about the reduction of the 50 % tax rate to 45% (on income above £150,000 a year) is that the reason for doing it is that these people do not pay tax if they do not want to. Think about it....the Chancellor and others state that more tax will be raised now it has been reduced by 5% which would seem to suggest that lots and lots of people just do not bother paying tax if they think it is too high. Most of us are not able to do this as we have to abide by the law. I think we would get more tax from a 50 % rate if the powers that be bothered to collect it properly in the first place and uphold the law and the spirit of the law. As so many seem to have avoided paying their dues I think that we should be chasing them instead of taking money away from the poorest in society and from pensioners. And then we allow the bankers who caused this problem in the first place to take massive bonus payments out of the money provided to them through quanitive easing. All in this together........not if you do not have bags of money to protect your own interests and are able to lobby and influence the Cabinet. It may well be that people at the bottom of the pile are winners with a few pence extra but this budget gives to anyone earning £200,000 over the previous 50% tax rate 5% savings which is £10,000 ie as much again tax free as the amount people can earn before starting to pay tax and almost twice the annual amount that a pensioner receives to live on from the state. Not really such a good package of measures unless you actually earn an awful lot!!!



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Gavin Barwell, 133 Wickham Road, CR0 8TE, Tel  020 8663 8741      © Gavin Barwell  2019       Promoted by Ian Parker on behalf of Gavin Barwell, both at 36 Brighton Road, Purley, CR8 2LG