Tuesday, 30 June 2015

Tomorrow's Blues - - - - a Tory budget

George Osborne will give his "Summer 2015 Budget" speech to parliament on Wednesday 8th July. As I write this, just 8 days away. There is much speculation about his intensions with many agreeing that it will entail a £5 billion child tax credit cut plus another raft of cuts to bring the total up nearer to £12 billion, some suggesting as much as £15 billion. On top of this it is anticipated that the top rate of income tax paid by those earning above £150,000 per year may be cut from 45% to 40% ............... a tax cut that is basically a handout to the rich.

Before BelperStuff wades into this, for the benefit of those who are already feeling miserable at the prospect of a smug Osborne turning the screw ever tighter on the disadvantaged, I offer you a distraction with this song that could have been written for such a true blue budget:

Tomorrow's Blues - played by Colosseum in 2003. I first saw this band in 1969 and they are still touring in 2015. If you want more of Colosseum and less of Osborne then follow this link.

For those of a more masochistic persuasion ........... read on:

Tax cut for the rich

If Osborne doesn't cut the top rate of tax this year then he will do it at some point before the next election, however, most believe that he will cut the tax from 45% to 40%. To put this into context, for a taxpayer earning, say, £200,000 per year they will see their tax bill reduced by £2,500 whilst those earning £1 million will be gifted £42,500. How many will benefit?

HMRC/BelperStuff 

As you can see, the 5% tax cut would do nothing for the majority of tax payers; by my calculation only 1 in 150 would benefit (and I am being cautious here). Government figures show that there are 6,000 taxpayers earning more than £1 million so that group alone will be handed at least £255 million but as there are a considerable number of them earning more than the base £1 million the final handout will be very much more. Only the treasury will know the true amount. From the figures generated when Labour raised the rate to 50% and then the ConDem government lowered it to 45%, we can be somewhere close if we assume that Osborne plans to hand over to the rich around £1,500 millions per year (£1.5 billion). To put this into perspective, the annual amount taken away from poorer families by way of the bedroom tax is around £320 million. So, when we compare the bedroom tax with tax cuts for the rich ............ for every £1 taken from the poor £4.68 is handed to the rich. We will find out next week if Osborne ramps up his bid to usurp the Sheriff of Nottingham as the most villainous scourge of the poor. Have a look at this brilliant piece of work by Professor Rebecca Tunstall if you want to know more about the impact of the bedroom tax.

Child Tax Credit cut

It is estimated that the proposed £5 billion cut to tax credits will mean that some families lose up to £1,670 per year .......... let's not forget that these are not the rich but families whose wages are not sufficient to pay all the bills. The poorest 30% of households will suffer the most but it is worth bearing in mind that child tax credits are an important element in the income of millions of households in the UK right up to those bringing in a combined £32,300 per year.

ONS/BelperStuff Socio Economic Income data 2012 - 2013
A word of warning on this last graph - - each of the socio-economic groups comprises around 2.6 million households. Based on income each group is a mixture of single persons, couples with or without children and pensioners. That means that the above graph contains averages, some households receiving no tax credits whist others are heavily dependent upon them. If I can find more relevant data I will return to this post and amend it.

That said, this graph gives us reason to be concerned. The 2nd decile has an average annual gross income of £15,638 and receives 8.68% of that income as tax credits; that's an average of £1,358 per year. You hardly need to take your socks off to work out that any cut to child tax credits will have a devastating effect on families. 

It is no co-incidence that much is being made of the statistic that there has been no relative increase is the rate of inequality in the past twelve months or that child poverty has remained static at 2.3 million. This is all part of the rhetoric used in the build up to the budget to justify the eventual cuts. Osborne will try to sell the idea that austerity has had no adverse effect on the poor.

It was Mark Twain who drew attention to the phrase:

There are lies, damned lies and statistics

or to quote Colosseum:

The future is here, welcome to tomorrow's blues.


   

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