‘If you’re wealthy enough to put loads of your pay packet into a tax-advantaged pension pot you can definitely afford to pay a bit more’
The run-in to the Budget has been politically damaging and economically doom-laden. But for all the dire warnings, the Budget had plenty to cheer about.
Delivering the £30billion of tax rises is no easy task – but nor too is cutting social security and funding for public services, as others have called for as alternatives.
The single biggest tax rise was a tried and tested one poached from the previous government – freezing personal tax thresholds.
While commonly described as a ‘stealth tax’ after the latest extension it will run for nine straight years, and by the end of the decade will raise a distinctly ‘unstealthy’ £67 billion. A typical worker on £35,000 will be £1,400 worse off as a result.
The rest of the Budget contained lots of small, sensible tax measures that will largely fall on richer households.
If you’re wealthy enough to earn income from dividends or rented out properties, live in a mansion, or put loads of your pay packet into a tax-advantaged pension pot you can definitely afford to pay a bit more. These tax rises were needed for two reasons – to ease the cost of living and strengthen the public finances.
There were welcome measures to cut energy bills but by far the biggest support came from scrapping the two-child limit on welfare support. This policy will lift around half a million children out of poverty. Measures like this should make us all proud to pay our fair share of tax.
The strengthening of the public finances also matters for the cost of living in the long run as it should reduce debt interest costs – government cash that could otherwise be spent on public services.
But as always with Budgets there’s a catch – and this one was a very backloaded one. While the welcome cost of living measures are coming next April, many of the income-sapping tax rises – not to mention cuts to public services – are all coming from April 2028. A General Election is due around that time – so the timing of this tax and spend grab seems a little far-fetched.
And while the Chancellor had better than expected news from the forecasts, households did not. The outlook for living standards over this Parliament remains bleak – the second worst since records began in the 1950s. The last time the outlook was this bad, outside of a pandemic, was in 1966. So a bad omen for living standards, but a good one perhaps for winning the World Cup?