So, later on today, George Osborne will wave his red briefcase and declare changes to keep the country on the thin line between losing the triple-A credit rating and putting too much burden on public services. The question – will he succeed in making things better within these constraints?
Well it depends, better for who? And I’m afraid to say I genuinely believe the only ones to benefit will be the rich and large businesses.
I say this independently of my political beliefs – although I am not a fan of the Conservative party, I have been willing to give them some benefit of the doubt while in the Coalition. So this isn’t one of those “The Conservatives always looking after their own” posts, but a genuine fear that those at the top genuinely believe that to improve the economy means giving the rich more cash, in hopes they will invest in more companies / employees / UK bonds.
This is the same logic that the US Republican party believe, when they say that the rich should have tax cuts, otherwise they won’t invest in US job and, that horrible phrase, “wealth creation”. The only problem with this argument is that Warren Buffet – one of the world’s richest men and therefore well-qualified to speak on behalf of the rich and an investor – wants to pay more tax, his fair share if you will, and declares such an extra payment wouldn’t affect his investment plans. I think it would be a reasonable assumption that the same logic would apply this side of the Pond.
You can almost understand the theory – if the rich are taxed less, there would be more cash to flow around the economy. However there’s another way to achieve this; giving millions of people a small reduction in tax. If every tax-payer in the UK was given an extra £10, that’s got to be approximately an extra £200 – 300 million flowing round the economy, no?
And this would be easy to achieve, by adjusting the personal allowance, the amount you and I are allowed to earn before paying tax. Everyone is allowed to earn currently approximately £6,500* tax-free a year in salaries and wages (or, if you’re a small business owner like me, in drawings). The Liberal Democrat party want this increased to £10,000 , which is slowly happening.
Surely, Mr Osborne, there’s scope to increase the speed which this happens. If everyone was allowed to earn an extra £1,000 tax-free, that’s £200 less tax a year we’d have to pay. I for one wouldn’t mind an extra £200, to coin a phrase, every little helps!
So, will he do it? Or will be bow to the louder, “more important” voices to give tax cuts at the top? As I said at the start of the post, looking at the musings in the papers this week, I am not optimistic this Budget will be much help. Unless you own a private jet and a small army of tax accountants, of course…
Edit 2.10pm: Of course, I meant £7,475 personal allowance. Apologies. Rates are available for the curious here.