Wednesday, 21 March 2012

GEORGE OSBORNE'S BUDGET STINKS



George Osborne's budget stinks. I'm completely flabbergasted by the news about tax credits. According to The Guardian's 2012 budget personal calculator, my girlfriend and I will be £435.74p better off after today's announcements. However, if I earned just a little bit more money, we would be £244.26p worse off due to the slashing of tax credits. Doesn't this hamper social mobility? How is anyone supposed to progress up the social ladder? Is this what you call encouraging aspiration, Mr. Osborne? I think not.

How is it even possible to be 'better off' staying in a lower paid job than taking on a higher paid one? What sort of government thinks that it is 'fair' to discourage working couples on low incomes who claim tax credits against earning a higher salary for fear of being 'worse off' than they would be earning much less? The only loophole in Osborne's revamped tax credit system seems to be... have more kids. The calculator suggests having a baby tends to bring tax credits up so that people end up being ever-so-slightly 'better off' again. Obviously, that still wouldn't cover childcare costs, etc., etc.

This 'budget for working families' - particularly on the tax credit front - is a sham. Working families should not live in fear of daddy getting offered a pay rise. In my opinion, getting a job with a higher salary should always make people at least slightly better off than they were before, but what Osborne's approach to tax credits does is prevent that from happening. It kills all hope for self-betterment. But then again, did you expect anything less?!

Image © HM Treasury via Flickr and licensed for reuse. The inclusion of this image is not an endorsement of this post.

13 comments:

  1. Luke, this smacks of knee jerk reaction and, for someone of your education, is not a particularly well reasoned criticism.

    The whole area of tax credits from introduction was flawed and unfair but sorting it out was always going to be painful. We need as a country to get more people self sufficient with a welfare system that supports the truly needy or temporarily down on their luck. Not one that has families living on benefits now for three generations.

    Not saying George Osbourne has necessarily got it right. Would need to study the Finance bill in more detail to comment on that, but the direction is where we need to go, like it or not.

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  2. Social mobility, is that what it's all about then?! People on 50k a year: my heart bleeds for them! Try existing on 10k, where half of that goes on rent and utility bills, and the chances of a pay increase are limited. Moving to a better paid job? Have you seen the jobs market?

    I have little sympathy for high wage earners when it's us people at the bottom end of the scale who are being punished by the cuts thia government are making. Here's an interesting chart for you on who is bearing the brunt:

    http://www.leftfootforward.org/2012/03/unfair-distributional-analysis-by-decile-charts/

    "The poorest 10% lose more than anyone except the richest 10%".

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  3. It really isn't that hard to see that the changes to tax credits aren't fair...put in the UK average salary into any budget calculator (26,020) and you are £545 worse off. In fact any one earning a salary between 22-35k or so will be hit hard.
    So there really is a case of restrictions on the benefits of social mobility, heaven forbid you get a pay rise. On the other side of the coin, heaven forbid you have your work hours cut.
    If i was offered a promotion or pay rise, id ask to do the job over 4 days and work cash in hand one day a week.
    Once you get out of London, it is very easy to see how lucky i am. Has Cameron now bought a vote off me - no chance.

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  4. I disagree, I think my post was a perfectly well reasoned criticism actually. Just read the directgov announcement about tax credits and you will see that my observations are sound. The fact is, both my partner and I work for a living, and we have a child, but between us we currently earn just under £25k a year (before tax). Tax credits give us just about enough for us to make do, and for that we are broadly supportive of the measure, as they genuinely do help working families (which is what we consider ourselves to be).

    However, the implication in this budget is that if I or my partner got a pay rise, or went up the payscale, we would be penalised for doing so and be poorer than we would've been had we stuck it out in a job on a lower salary. That, to me, is an assault on aspiration.

    The reality is that I am not someone who considers myself middle class. We are not a middle income family - individually, my girlfriend and I actually earn comparatively very little compared the UK's average salary. So if I can see the flaw in a system which discourages people from working their way up the career ladder and upping their salaries for fear of being 'worse off' in tax credits (unless they have another baby!), then I'm sure millions of others can too.

    That being said, I'm not short-sighted enough to believe that everything's hunky dory in the welfare system and I'm with you in that reform is definitely required. But people should always feel the benefit of graduating to a higher salary, and under the current tax credit measures, they won't.

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  5. It seems that one of the Anonymous commenters is suggesting that I am a 'high wage earner.' I suggest he (or she) takes note of my last comment (which was aimed at Tom Clarke) and reads some of my previous posts about the jobs market and my experiences of unemployment before spouting off.

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  6. anon @ 03.10 - i think you are missing the point and have used an old graph that doesn't take into account yesterdays budget. The budget has done something for people earning around 10k, has improved tax for those earning 39k plus, and has been bl£ddy great for those on 150k.
    But it has hit those on the average UK wage level, and has meant that you end up worse off if you get a promotion to come into the 22-39k band.
    So Luke is spot on, this is against social mobility.
    It is millionaire Tories patting the poor on the head and saying here's a few quid for you, but holding back the lower middle class. It is like something out of a Victorian novel!

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  7. I think you will find that this budget was a sop to the Libdems to try and increase their percentage of the votes from a low of 8% . A level at which they face wipe out.

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  8. Fair point about killing off aspiration for some, Luke, but anon 4:13 AM (if anyone really was blogging at that hour) has really hit the nail on the head with this being a sop to the Lib/Dems.

    Trouble is we are in the mire financially, but we do not have a strong decisive government to get us out of it. The Coalition is too busy keeping its unnatural bedfellows on sides to give the leadership the country needs and the opposition are still little better than hopeless.

    Never mind though for Thanet is on the ball and will shortly be debating equal marriage. Not for them trivialities like clean streets or removing stinking seaweed nor even sorting out firework displays and windsurfing events. No, our council are on a much greater mission!

    Suddenly Nigel Farage looks like the knight errant, and that has to be pretty desperate.

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  9. George Osbourne made light of it and did not explain that the simplification of tax allowance for the over 65's would mean that 3.9 million pensions would not benefit from the increases in personal allowances given to the under 65's. In deed he boasted that a pensions increase of £5.30 per week was the biggest ever. What he did not say was because of government policy the inflation rate that triggered the pension increase was over 5% leaving pensioners and many others with big increases in the cost of living.
    So now pensioners will be disadvantaged compared to the rest of tax payers to the tune of £83 a year.
    Seems like he has clawed back £1.60 of the £5.30. Nothing to boast about.

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  10. I switched to the new blogger layout yesterday and for some reason time stamps on Blogger comments have gone all crazy. My settings claim I have it set to GMT but clearly it's not - looking at some of your time stamps, it looks like it's set to a different time zone entirely. Not sure what I can do to fix this but I'll see what I can find out.

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  11. Luke I have been on to blogger the time stamps are a known bug which they will sort out.

    As well to remember here that for many working people the tax credits just replaced the tax allowances that one used to get for being married and having children.

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  12. Tom Clarke, I realise you're on a personal crusade against the same-sex marriage proposals, but you really don't need to bring them into every other debate.

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  13. Anon old buddy, when on a crusade you just don't miss a trick or a chance to highlight ones campaign, That said I think my point was more about useless politicians at all levels wasting time and not dealing with the real issues that they were elected to sort out. Same sex marriage was not in the manifesto of any political party at national level and most definitely not down here in Thanet. Mind you, I guess neither was granny tax.

    Incidentally, what exactly are you bringing to the debate?

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