The Chancellor's gifts to the nation - Autumn Statement 2012
Good old George- he’s always been an optimistic sort. Like calling it an ‘autumn’ statement, when piles of the white stuff all around the country would clearly suggest we have already slipped into winter. But now that his growth predictions proved over-optimistic, what Christmas presents, or humbugs, did the Chancellor’s statement include yesterday?
Well first of all, the Christmas crackers included the widely tipped scrapping of January’s 3p rise in fuel duty. Even taking into account the fact that pump prices have dropped recently, George still felt it was too much to ask people to cough up more for their cars in the new year.
The personal allowance is also going up by more than previously advised. It’s not quite the LibDems £10,000 per year, but the extra £235 to bring the total allowance up to £9,440 will save basic rate taxpayers an extra £47 a year, and an additional £267 from the current £8,105 figure. Shame the higher rate band threshold is not increasing at the same rate, meaning those earning in the mid £40ks will be paying the price for those at the bottom end of the wages scale.
One group who will certainly not be paying, are those with income over £150,000, whose rate drop from 50% down to 45% from April was announced previously. Still, with all those rich sorts saving a reported £107,000 each a year, it makes sense to pay for that by cracking down on benefits.
Clearly upholding the myth that everyone on benefits is a scrounger, benefits will only increase by 1% a year for the next three years. That’s less than inflation, and means that, in real terms, people on benefits in three years’ time would be worse off than they are today. However, this also includes working benefits (like working tax credit) and child benefits.
Still, no-one will be on benefits in three years’ time will they, because George is cutting the large company rate of corporation tax even further in 2014, down to 21%. This means that companies with chargeable profits of over £3million a year will only pay 1% more in tax than a company making £3,000. But this will stimulate the economy and generate loads of jobs won't it? Of course it will. Because it’s not like multinational corporates find paying UK corporation tax optional anyway is it?
State pensions will go up next year by slightly more than inflation, at 2.5%, but George is presumably hoping we won’t remember that a 2.5% increase will not compensate for the scrapping of age allowances from April- the so-called Granny Tax. But it’s OK, he’s also limiting tax relief on pension contributions from 2014/15, where the lifetime pension relief allowance will fall from £1.5m to £1.25m, and the annual allowance (how much you can put away each year) cut from £50,000 to £40,000. The IHT threshold will also increase by 1% from next year. In case £650,000 per couple isn’t enough for you.
Still, the Chancellor boasts that there are no net tax rises in his budget, which he has balanced, but only by including the proceeds from the 4G auction which hasn’t actually happened yet. Mind you, the veracity of that statement probably depends on who you are.
One other thing that the Chancellor was very proud of was that prosecutions for tax evasion were up 80% . However, there was less talk of tax avoidance, other than the advent of the new anti-abuse rule coming into force next year. Perhaps the Government like tax avoidance, after all, one of the big announcements in the March budget was the clever shares-for-employment rights scheme, to allow employers to walk all over employees provided they give them some shares. Even the Office for Budget Responsibility, is sceptical, claiming:
“There are a number of uncertainties about the costing….the cost is expected to rise towards £1 billion beyond the end of the forecast period….it is hard to predict how quickly the scope for tax planning will be exploited; again this could be quantitatively significant as a quarter of the cost already arises from tax planning”
A quarter of the cost? Given the costs of the scheme are estimated by the Exchequer to be £80 million by 2017/18, that means the Government is putting aside £20m of our money to allow people to avoid tax through a new type of employee reward scheme. And you can bet these employees we’re talking about aren’t nurses, teachers or charity workers…
Merry Christmas everyone.