Wednesday, 20 March 2013

Budget 2013

*Deep breath. The Budget has just been announced. 



The Government has just announced a new Childcare subsidy. Unfortunately, for people like myself, trying to get back into work but the rising costs of childcare causing a barrier, this scheme doesn't kick in until 2015 and will take a year or so to reach school age children. 


These tax-free childcare vouchers, worth £1,200 per child, will be on offer, along with increased support for families with children on universal credit. From the autumn of 2015, working parents will be able to claim vouchers to subsidise the cost of childcare for every child under five. Parents earning up to £150,000 will be able to claim back up to £1,200 of childcare costs a year. The byline for this measure on Tuesday is that the Government are paying for 20% of your childcare but in reality by 2015, this 1,200 will not reflect anything near 20%. 

This move seems to reflect the governments inconsistent approach to supporting families in the face of last year's measures. Why to stop Child Benefit for families where one earner who earns over £50,000 per annum are no longer eligible to claim Child Benefit when families with a combined income of up to 150,000 can claim tax free childcare?

Also for low income families affected by the change in benefits to the Universal Credit means that any measures to help with childcare are effectively cancelling each other out. The most benefit felt from these measures will be directed at the 'aspirational' lot while those on the lowest incomes suffer. Those at the top and those at the bottom are the hardest hit again even according to the Governments own assessment on impact

This diagram by the Joseph Rowantree Foundation shows the changes and their effects:

Copyright JRF


The rest of the key points of Chancellor George Osborne's Budget.

FUEL, ALCOHOL AND CIGARETTES

September's 3p fuel duty rise scrapped
April's 3p rise in beer duty scrapped. Instead, beer duty to be cut by 1p
Annual inflation +2% rise in beer duty to be ended but "duty escalator" to remain in place for wine, cider and spirits
Cigarette duties unchanged - continuing to rise by inflation +5%

INCOME TAX
Limit at which people start paying tax to be raised to £10,000 in 2014 - a year earlier than planned

HOUSING
Shared equity schemes extended, with interest-free loans for homebuyers up to 20% of value of new-build properties
Bank guarantees to underpin £130bn of new mortgage lending for three years from 2014

STATE OF THE ECONOMY
Growth forecast for 2013 halved to 0.6% from 1.2% in December
Office for Budget Responsibility watchdog predicts UK will escape recession this year
Growth predicted to be 1.8% in 2014; 2.3% in 2015; 2.7% in 2016 and 2.8% in 2017.

BORROWING
Borrowing of £114bn this year, up from previous £108bn forecast
Borrowing set to fall to £108bn, £97bn and £87bn, £61bn and £42bn in subsequent years
Borrowing as share of GDP to fall from 7.4% in 2013-14 to 5% in 2015-16
Debt as a share of GDP to increase from 75.9% in 2012-13 to 85.6% in 2016-17

SPENDING AND PAY
Most government departments to see budgets cut by 1% in each of next two years
Schools and NHS will be protected
£11.5bn in further cuts earmarked in 2015-16 Spending Review, up from £10bn
1% cap on public sector pay extended to 2015-16 and limits on "progression" pay rises in the sector
Military to be exempt from "progression" pay limits.
Proceeds of Libor banking fines to be given to good military causes, including Combat Stress charity

JOBS
600,000 more jobs expected this year than at same time last year
Claimant count to fall by 60,000

TRANSPORT AND INFRASTRUCTURE

HELP FOR BUSINESS
Corporation tax to be cut by 1% to 20% in 2015
New employment allowance to cut National Insurance bills cut by £2,000 for every firm
450,000 small firms will pay no employer National Insurance
Government procurement from small firms to rise fivefold
Tax relief for investment in social enterprises
Stamp duty axed on shares traded on growth markets like Aim.
Tax avoidance and evasion measures, including agreements with Isle of Man, Guernsey and Jersey, aimed at recouping £3bn in unpaid taxes

ENERGY AND THE ENVIRONMENT
Tax incentives for ultra low-emission cars
Pottery industry in Midlands to be exempt from climate change levy
Tax allowances for investment in shale gas

INFLATION
2% Bank of England inflation target to stay in place
Bank remit to be changed to focus on growth as well as inflation

PENSIONERS
Single flat-rate pension of £144 a week brought forward a year to 2016
Cap on social care costs confirmed

FAMILIES
20% tax relief on childcare up to £6,000 per child from 2015
£5,000 payments for those who lost money on Equitable Life policies bought before 1992. Extra money for those on low incomes



For a full view of the Budget see here.

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