The Budget

[Mick Mac]

Looks like the Tories won on most of the coalition debates.

The VAT increase is a fair way to collect a lot of tax. Food and childrens clothing remain zero rated. A ,ot of VAT related spending is optional.

The increase in the personal allowance (earnings tested) helps lower earners.

The Capital Gains rise to 28% is less than expected (40%) and therefore the gap between income and capital gains tax rates is sufficient to encourage saving/investment. Vince Cable lost out here, he wanted personal investmnets, second homes/buy to lets etc taxed at 40%.

Reduced Corporation Tax should attract companies to the UK and prevent UK companies relocating.

The welfare state and housing allowance probably needed a review.

NHS spending will be increaed in real terms - Education unfortunatley will probably lose out.

Like every other country in Europe, public sector pay has been frozen but many private sector employees have had a pay cut.

Whether any of these cuts endanger the recovery we will find out. Hopefully not.

[????]

I think the cuts will dampen the recovery but not half as much as a Sovreign Debt Crisis would. I predict possibly some more QE and very low interest rates for the forseeable....plus a gradual fall in house prices in a very moribund market. Private sector workers have had pay cuts, compulsory lay offs (Honda etc) and redundancies, so if I here another unison official saying "Why should the Public Sector bear the brunt of this" I will fooking explode. Raising Tax thresholds for the poorest in work has to be a good thing and linking the state pension back to earnings rather than inflation is at least a start to stopping the vast majority of private sector workers slipping into poverty on their retirement over the next 30 years! i agree on VAT but it will be used as a stick to beat 'the evil ones', infact it is the easiest and most efficient way to raise tax, brings us up to most EU countries and is, as you say not on food, babies clothes, nappies and books/newspapers. I'm off for a cider.

[Mick Mac]

Agree with all of that. You and me should discuss this over a beer soon. Or maybe just talk about football instead. Less taxing....

[Wilhelm]

Anyone fancy a pint?

[citizenED]

They are having one (or two) on Friday, Wilhelm, if you care to join them.

[giggirl]

I bet Nick Clegg does the Starbucks run at all the cabinet meetings. Bitter: moi? Just a tad.

['bout now]

Can't say I'm surprised, they will make Ideological hay while the sun shines on a bolloxed economy.

However if you voted for LD, look yourself in the mirror and ask "is this anywhere fucking near what I wanted?"

[Loz]

'bout now Wrote:

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> However if you voted for LD, look yourself in the

> mirror and ask "is this anywhere @#$%& near what I

> wanted?"

Apart from the VAT rise, absolutely. And even then I'm not too surprised about that. Labour refused to rule it out before the election for a very good reason - they'd have done much the same thing. The LibDems weren't too clever making that a big issue at the election. Apparently Vince Cable advised them not to at the time.

As far as I can see:

- the public sector to be trimmed down. That had to happen.

- The lowest paid protected from most of the hit. Yes you can pick out separate parts of the budget where they have been hit, but in total most low paid come out as 'not gained' rather than lost.

- a push to move jobs from public to private sector. Risky, but I think the right idea. The more non-jobs trimmed from the public sector, the better. No, not the front line teacher/nurse/police jobs, but the Employee Dignity Advisors and the like (yes, I made that job up, but I'm sure there is something out there like that).

- the tax threshold and pension changes are a very positive move.

Personally, I reckon our household is about ?700-800 a year down, based on the Beeb's calculator on income and NI changes, plus my finger in the air stab at VAT change effects. I'm not too unhappy about that. That's the way things are at the moment. Middle class, OK income - I'm one of the ones that should be taking more of the the brunt of it.

A lot of the good things in this budget have Lib Dem influence written all over them. The only disappointed ones will be the refugees from Labour that expected the LibDems to be Labour in a new set of clothes. Add that to the upcoming Great Repeal Bill, where all of Labour's assaults on liberty are to be undone and, yes, I'm pretty happy that the people I voted for have had the influence they have, given the relative number of MPs they have.

[Moos]

The taxes side of the budget reads as reasonable to me.

I would like to find out more about the budget cutting side and the impact on unemployment, as that is more of a worry.

Good to see NHS and overseas aid protected - but as Mick Mac says, schools may well lose out.

[Marmora Man]

I applaud much of hat is in the budget. Not quite so happy to see the NHS and overseas aid protected. From personal experience I know that there is much wasted spending in the NHS. Equally, much of our overseas aid appears poorly targeted allowing room for sensible cuts.

[red devil]

Loz, are you happy with the budget proposals of the bankers levy charge? The LibDems for a long time have made great play about how they were the only party that would stand up to the banks and hit them where it hurts, e.g. 10% tax on profits, limiting cash bonuses to ?2.5k pa. According to one Beeb post-budget discussion I saw on the box yesterday, these proposals would have brought in around ?5billion. Now, because the Tories have had their way by introducing their levy charge, this will only bring in ?2.5billion. It's quite clear to see who is wagging the tail of the lapdog.

Interest rates should remain 'historically low', and up to now this has cushioned a lot of people from real hardship, but they will eventually rise. Try factoring in a 2-3% rise in your mortgage rate, which sounds a lot but isn't when you guage it against the long term average, the 'middle classes' are eventually going to be hit a lot harder that the Beeb calculator might suggest.

[skidmarks]

Are you ?middle class? if you rely on the State for your children?s education and your families health care? I would say no, I don?t think you can class yourself as ?middle class; just as you can afford the most expensive rug in Ikea, I would say you are a ?middle earner? working class.

I always thought that if you could comfortably afford to sends your kids to private school and have bells and whistles Buba cover and not using the state then you were real ?middle class?.

[Brendan]

The VAT increase is going to hit small businesses hard. But then your typical Tory and his cronies aren?t particularly interested in small businesses. They bang on about being business friendly but their friendliness is reserved for the powerful business concerns where their ilk?s money lies. The Murdochs and Tescos of the world can weather these increases and further elbow out smaller businesses.

Small government and big business. Obviously because government is accountable but business can do what it likes.

If these people weren?t held at least slightly back by the grace of democracy they would have the bulk of the population working for poverty wages (from which tax would be drawn when they see fit) with no public services while the privileges 10% from which they come would live in serviced gated communities away from the rabble.

[Loz]

Loz, are you happy with the budget proposals of the bankers levy charge?

Personally, I think that banker's levies and such smell like the politics of envy at work. Like it or not, a lot of the wealth of the south-east region is due to London being such a huge player in the financial markets. Also a flat levy may actually destabilise some banks that are still looking a bit iffy. On the other hand, the treasury has to rustle up the best part of ?70 billion a year to fix this mess, so hitting the banks is an easy couple of billion to throw in the hole.

I see also the Unions are screaming about 'no cuts to the PS'. It's all very well for the public sector to say, 'Why should we suffer - we didn't cause the recession'. True, but the huge PS increase over the last ten years has ridden on the back of the financial sector boom. Now it's gone, the PS has to shrink.

I'm surprised no one has mentioned the changes to the Disabled Living Allowance. Labour hid a lot of unemployment here - and the recipients didn't mind as there was less paperwork/bureaucracy involved. Good to see medical reviews being imposed.

Interest rates should remain 'historically low', and up to now this has cushioned a lot of people from real hardship

Absolutely. One of the best things about this budget is that the credit agencies have looked upon ii favourably, which should protect the UK's AAA rating. That should (hopefully) keep interest rates in check for a while, meaning home-owners and business can keep their heads above the water (and renters too - higher interest rates would lead to higher rents).

It's quite clear to see who is wagging the tail of the lapdog.

Let's not forget that the LibDems are the smaller partner (by some margin) in this coalition. They are the tail to the Tory dog. Any influence that they can exert over the Tories can only be positive, as shown in this budget. Yes, this budget had to happen. Yes, the Tories took the opportunity to throw in some political ideology and shrink the government size. But I do believe that the 'good' stuff in the budget was LibDem influenced. Had the Tories won an outright majority this would have been a very different budget.

[SeanMacGabhann]

Nothing to add to the comments made by others on the budget (quids makes some good points) but one thing that really irks me is craveness to the credit-rating agencies. Who f***ing died and made them so powerful. It's not like they actually know what they are talking about all the time is it?

I know what the impact of a downgrade would be, but surely democratic countries have a right to say "thaks for your OPINION and everything but..."

[????]

The credit agencies have not much to be proud of in the credit crunch agreed absolutely...but democratic countries that have borrowed heavily off international finance have not a huge amount of wriggle room and international finance thus far tends to believe the credit agencies over sovreighn states. To stick up for the devil the credit agencies haven't downgraded our status they've just said we need to demoonstrate thet we are doing something about our worrying levels of debt. I think the measures taken are needed BUT the tories are also taking this as an opportunity to attack 'the state' as patrt of an ideological commitment to reducing its size rather than just balancing the books to reinvest once we're back on a keel....although their plans if they work leave a nice little govt surplus handily placed just before the next election...tax cuts anyone?

[SeanMacGabhann]

Very well put sir

But I'd still like to see the agencies be judged themselves. They aren't truly independant are they - don't they have ties to a couple of the major banks?

[????]

I'd like them audited and at the least made to explain or fined/sued for some of their past ratings. But I'd also like an audit for the auditors who have hardly covered themselves in glory. I also blame it on Excel...as a few already have. Too much 'sophisticated' modelling happening too quickly...but that's another story ;-)

[david_carnell]

Sean, you work with Excel - is this your fault?

"It's not as bad as it could have been" is about my best assessment so far. As a public sector worker I'm unhappy my pay is frozen, but at the moment anything other than cuts or job losses is a bonus with this govt. I'm not frontline anymore either and therefore have a worthless job that can be cut with no discernable impact on the country. Just like all the other non frontline personnel. Oh, how we wish we did something useful!

VAT will hit the poorest hardest with their little disposable income bringing in less. It is regressive.

The government is lowering the point at which people start to pay higher rate income tax so that taxpayers currently on the higher rate will not benefit from the policy. But, even so, as green line in the graph below shows, the distributional impact favours middle-income households rather than poorer ones (that is, middle-income households gain a lot more as a proportion of their overall income than poorer ones).

http://www.leftfootforward.org/images/2010/06/Budget-distributional-impact.jpg

The blue line shows the combined impact of the income tax cut and the VAT rise using one standard method of calculating the distributional impact of VAT. (Basically, the distributional impacts of VAT are harder to estimate because this depends on the relationship between income and expenditure for each household. This technique uses spending figures and income figures from the UK Expenditure and Food Survey (EFS) and work out the distributional effects of the VAT increase as if it were a reduction in disposable income using EFS income deciles.)

The graph shows that the poorest deciles lose far more from the VAT rise than they will gain from the income tax cut. The graph also shows the impact is extremely regressive across the income distribution, with low-income groups losing out far more proportionately than middle- and higher-income groups.

And some groups will be especially badly hit by the VAT increase ? especially those that don?t earn enough to pay income tax: pensioners, the unemployed and parents in low-paid part-time work.

[????]

2.5 percentage point and upto the EU norm.

Easy and cheap to collect and not effecting the basic neccessities, a tax on spending on which we all have some choice.

...and Labour would have probably done it, they certainly didn't rule it out. Only the Liberals did.

If we go bust the poorest will be by far the worst affected

[Brendan]

Don?t sound surprised. These people are Tories. They are of the basic personality type that bullies those weaker than themselves. Their entire raison d'?tre is to grind the poorest into the ground while profiting from it themselves.

They even take pleasure in it. I have more than once had to listen to the guffaws of non-pr trained slurry from the party when they discuss poverty and the situations that people who they see as lesser than themselves have to deal with.

I wouldn?t have got into bed with them but I?m glad that the Lib Dems had the stomach to.

[Mick Mac]

Don't forget that the highest earners, in changes announced since the start of this recession now pay 50% tax, have lost the benefit of their personal allowance, have higher national insurance contributions on earnings, have had relief on their pension contributions slashed and will also pay higher CGT (if they have amy money left to invest).

I think it is right that this has happened, but don't believe those who say the lower earners are hardest hit.

I think there is a fair balance being struck.

[Loz]

David,

The green bars on that graph are counter intuitive and I'd question them. The 'income tax cut' was a raising of the threshold - i.e. worth ?200 to everybody on the 20% tax rate. How can this have a higher percentile impact on higher (but still in the 20% tax bracket) earners.

And how can the very highest percentiles still have a positive gain effect, when it does not apply to them?

[Jeremy]

I'm in favour of the VAT increase, rather than an income tax increase. It seems to be a fair tax rise, which should have a very small impact on the poorest. VAT is largely applied to luxury products, essentials tend to be exempt.

I don't see why it will necessarily impact small business more than an equivalent income tax rise.

I have no idea why you would want to "stand up to the banks and hit them where it hurts"... surely what we want to do is tax fairly while reducing risk... not some sort of childish revenge.

[skidmarks]

Jeremy Wrote:

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> I'm in favour of the VAT increase, rather than an

> income tax increase. It seems to be a fair tax

> rise, which should have a very small impact on the

> poorest. VAT is largely applied to luxury

> products, essentials tend to be exempt.

I think you'll find some of the poorest would class Sky TV as an essential these days