Budget 2012: Why we are not “all in it together”
Today’s budget announcement by George Osborne gave further evidence to contradict the government’s fallacy that “we are all in it together”.
The chancellor used the budget to continue his attacks on the poorest in society while giving even more tax breaks to high earners and big corporations.
The biggest news to come from today’s budget was the decision to cut the top rate of income tax from 50% to 45% on earnings over £150,000. To put the giveaway into context, the cut will equate to a £5,000 tax reduction for somebody earning £250,000 and £42,500 for somebody earning £1million. Osborne chose to give a low profile to his plans that will actually fund the cut. During the Budget statement Osborne claimed the giveaway would be funded by an increase in stamp duty on properties over £2m, but the figures just don’t add up. The tax cut will actually be funded by the chancellor’s continued attacks on welfare, with £10bn worth of further cuts planned, and his surprising decision to hit pensioners for £3.5bn. Hidden away in the budget were the decisions to scrap income tax breaks for pensioners while also freezing age-related benefits for around 5 million pensioners.
It comes as little surprise that the 50p tax rate has been reduced: the Tories have wanted the rate reduced since they came to power but have been waiting for the right time and now they have the Lib Dems on their side in their mission to help out the wealthiest in society. The Lib Dems have carried out yet another U-turn, following up their backing of the increase in tuition fees and the decision to back the destruction of the NHS with this latest move. It was only last year that senior Lib Dem ministers publicly argued against the tax break. Chief Secretary to the Treasury Danny Alexander appeared on the Andrew Marr Show last summer dismissing the idea of scrapping the rate while stating that Conservatives calling for the removal were living in “cloud cuckoo land”. Here’s what Nick Clegg had to say about it in November last year: “I do not believe that the priority at a time like that is to give a tax cut to a tiny, tiny number of people who are much, much better off than anyone else.”
As well as Osborne’s gift to high earning individuals he has also announced yet another tax giveaway to large corporations by reducing corporation tax to 24% (not that many of the large multinationals actually pay the full amount). This will be followed by a further 1% reduction in 2013 and 2014 bringing corporation tax down to 22%. This move means that a business with a multimillion pound profit will only be required to pay 22% tax, only 2% more than someone on minimum wage paying 20% income tax.
The Government have tried to claim that it is a fair budget, with Osborne quoting Adam Smith and Clegg even going as far as calling it a “Robin Hood Budget”. Labour Leader Ed Milliband summed it up well in his budget response: “After today’s Budget, millions will be paying more while millionaires pay less.” He went on to add: “Only the Lib Dems could be dumb enough to think George Osborne’s Budget is a Robin Hood Budget – Calamity Clegg strikes again.” The government have tried to stress the fairness of the budget, arguing that raising the personal tax allowance helps those at the bottom. However, research carried out by the IFS shows that the tax change is a regressive move and benefits the rich rather than the poor. See graph below.
The budget follows Monday’s announcement that the minimum wage is to be frozen for 16-20 year olds and last week’s findings by the Office of National Statistics that 270,000 posts were cut from the public sector in 2011 (equating to around 740 jobs a day) including over 30,000 in the NHS and 71,000 in education.
Today’s budget statement reaffirms the argument that it is the mass of working class that are paying off the deficit caused by the excesses and greed of the richest few.