I have had many emails and letters regarding the Chancellor’s announcements in his latest budget, so I thought it would be appropriate to provide my thoughts on them.
I welcome that 2 million low income earners will be taken out of tax altogether whilst 24 million ordinary families up and down the country will benefit from the largest ever increase in the personal tax allowance. I am also particularly pleased that the Government has been able to introduce a higher threshold and some flexibilities about the way families will be affected by the reforms to child benefit which I know was causing a good deal of concern and would have affected many.
As regards the freezing of the higher pensioner allowances this in no way affects the 'triple guarantee' to pensioners which will see the biggest ever rise in the state pension this year; continued protection of key benefits such as Winter Fuel Allowance and free bus travel etc; and the poorest pensioners will see an uprated pension Credit Guarantee Credit to match the cash rise in the basic state pension whilst the Warm Homes Discount means more than 600,000 will enjoy a £120 discount to their fuel bills. These are benefits exclusively for pensioners not enjoyed by the rest of the population. After the Budget half of those over 65 will not pay tax at all in 2013/14 and nobody will pay more tax next year as a result of these measures and there are no cash losers. I am at a loss therefore to see why this measure has been caricatured as 'a granny tax' given that pensioners remain just about the most protected group of our citizens despite the challenging economic conditions facing us all and will continue to see their income rise. The average loss from the tax allowance alterations will be £83 for the smaller number of pensioners who will be affected but this will be substantially overtaken by the increase in the value of the basic state pension in any case.
We are reducing the top rate of income tax to 45p so that Britain no longer has the highest rate of income tax in the G20 which studies show has actually led to a significant reduction in the tax take by the Treasury. The Office of Budget Responsibility calculates this change will cost £100m at most whilst the other measures in the Budget aimed at the richest are estimated to bring in £500m, five times as much revenue as the 50P rate did. Labour introduced the 50p rate as a temporary measure just months before leaving office but it is clearly undermining our competitiveness and there is ample evidence of businesses taking the decision to invest outside the UK or in some cases of already having relocated. The experience of all previous governments has been that keeping taxes fair and low brings a higher tax take for the Exchequer which can then be used for investment or tax allowances benefitting the least well off.
A number of other very practical measures to help small businesses in particular have been widely welcomed even if they did not make the top headlines. The move to accelerate reductions in the corporation tax rate towards the 20p target rate, the lowest level in the G7, is a clear sign that Britain is open for business. In Worthing we are likely to benefit from the news that GlaxoSmithKline, one of our largest local employers, has announced plans to build its first new pharmaceutical plant in the UK for 40 years which will have a knock-on effect for that major business continuing to invest in this country rather than abroad.
I realise that many people are being hit disproportionately by the continuing high cost of petrol and I would have liked the Government to have been able to do more at this stage. At the autumn statement we took more action to help households with motoring costs by freezing fuel duty until August of this year and scrapping a second planned rise altogether. Subsequently the Government was able to deliver additional support worth £4bn and petrol duty will be 6p less than was planned under measures by the last Labour Government but the continuing rise in the oil price has negated the effect of much of this.
Taking these measures altogether and in the context of the continuing economic squeeze I think the Chancellor managed to pull off a sensible balancing act in the Budget with a particular focus on a number of measures that will help businesses expand and create jobs and help pull us further away from a 'double-dip recession' which we now look as though we may be able to avoid which is crucial. This is the only way we are going to be able to help the many younger people who are not in training or employment and who we are helping with a the most substantial and sustainable programme of practical help to date through the £1bn investment in the Youth Contract which I hope will benefit many in East Worthing & Shoreham.