13 nasty details hidden in Budget small print the Tories won’t want you to read
Chancellor Rishi Sunak has announced billions for roads, the NHS and coronavirus help in today’s Budget.
The Tory finance chief turned the spending taps to ‘gushing’ as he laid out what experts called the biggest giveaway Budget since 1992.
There are some restrictions on entrepreneurs and a tax hike on EU nationals.
But mostly it’ll be funded by an explosion in borrowing – the exact thing the Tories slammed Labour for doing during the 2008 financial crisis.
With all those big picture measures, and the fear of the COVID-19 virus, it’s easy to miss the small print of the 125-page Budget document and how it will hit you.
So as a public service we’ve gone through it with a fine-toothed comb – and picked out an awkward 13 things the Chancellor may well prefer you not to read.
1. Coronavirus means a UK recession is ‘quite possible’ this year
This first one is actually not from the government – it’s from their budget watchdog, the Office for Budget Responsiiblity.
“Historically, the chance of the economy falling into recession at some point in a five-year period is roughly one-in-two,” they say.
“But a recession this year is quite possible if the spread of coronavirus causes widespread economic disruption.”
2. A sneaky change could hit millions of people’s pay and pension
Unions sounded the alarm after the Budget was used to launch a review of the Retail Prices Index (RPI) measure of inflation.
The government claims RPI has “shortcomings” in how it’s measured and has proposed aligning it with the lower CPIH rate after February 2025.
But the higher RPI is used to calculate many people’s pension payments and pay uprating, according to the GMB union. So removing it will mean a hit to future payments.
GMB general secretary Tim Roache warned: “These proposals will be a hammer blow for millions of working people and pensioners.
"This might be presented as a technical issue but if this goes through it will end up costing millions of workers and pensioners their full, hard-earned compensation."
3. Millions of EU nationals will be whacked with a £624 NHS charge – raking in £1.5billion
The Budget confirms the Immigration Health Surcharge for non-Brits using the NHS will explode from £400 to £624 per year.
And crucially it will be extended to more than 3million EU nationals who live in the UK from 2021 – even those who work in the NHS or pay taxes in this country.
We knew this would happen from the Tory manifesto. What’s new, however, is the sheer size of the tax grab from EU nationals.
Overall the Treasury is planning to cream off £1.575bn in extra Immigration Health Surcharge over five years, from 2020/21 to 2024/25.
There will be a discounted rate for children, but it’ll still be £470 per year.
4. Universal Credit may only be fully rolled out in 2026
Again, this is from the OBR watchdog and not the government. But it’s important.
Last month, the government admitted it had pushed back the rollout of Universal Credit again and it would only end in September 2024.
Yet it’s been delayed more than seven times. And now there have been so many delays, the OBR has decided to just assume it will only finish in September 2026.
“Our decision to diverge more materially from DWP’s plans reflects both the accumulated experience of the past seven years,” the OBR said drily.
“And the greater emphasis on taking things slowly to protect claimants.”
5. The poorest people will gain less than middle earners
A little-noticed ‘distributional analysis’ in the Budget (see above) shows the poorest 10% of households will gain between £250 and £300 per year.
But while nothing like the bad old austerity days, that’s still less than the benefit to nearly everyone else. Only the top 20% are benefiting less.
The analysis, produced by the Treasury, shows the impact of tax and benefit changes in 2020/21 from both the 2019 Spending Round and the 2020 Budget.
6. Vulnerable families will face a £5 ‘Boiler Tax’
Blink and you’d miss it, but the Chancellor briefly said “from April 2022 I’m freezing the levy on electricity and raising it on gas.”
Raising it on gas, eh? So what does that mean?
The small print shows he was talking about a consultation on a Green Gas Levy, a tax on gas suppliers in order to fund the production of bio-methane.
Treasury officials told The Times it would cost £1 per household per year initially, rising to £5 per year by 2025.
But the Chartered Institute of Environmental Health warned it was "deeply worrying".
Chief executive Anne Godfrey said: "By freezing electricity costs and increasing the cost of gas, the Chancellor is effectively making energy more expensive for everyone. The plan to increase the levy on gas is deeply worrying and we urge the Government to clarify their intentions and outline how they will support those living in fuel poverty."
7. There’s a massive percentage tax rise on rolling tobacco
Given how bad they are for us – and the NHS – you’d expect cigarettes to see a tax hike.
But the duty on roll-ups, used by some of the most skint smokers, is rising by far more than that on ordinary cigarettes. For most tobacco products it’s RPI inflation plus 2%; for hand-rolling tobacco it’s RPI plus 6%.
8. Tories have handed a £2.2bn tax break to £110,000 earners
A reeeeeeally complicated pensions change will help the NHS – but at the cost of giving £110,000 earners a tax break.
Basically, doctors had warned they were refusing overtime shifts because they were being pushed over into a different set of pension rules.
The current system means if people earn £1 over a £110k threshold, they are classed under a completely new set of rules for calculating their income to decide what tax relief they'll get on their pension.
The rules are pretty simple if people are definitely in one system or the other. But because doctors’ average salary is £112k they didn’t know which system they were in.
Treasury officials were looking at raising the £110,000 threshold to £150,000. Now they’ve gone even further and raised it to £200,000 from next month.
But the relief will apply to everyone, not just doctors. And the small print shows it will deprive the Treasury of £2.175bn over five years.
9. There’s no mention of where tampon tax funding will go
Since 2015 the money raised by the hated 5% VAT charge on tampons and sanitary towels, which couldn't be abolished while the UK was in the EU, has been used to fund a charity pot for women's groups.
Since its creation, £62million has been awarded by the fund to projects that help disadvantaged and vulnerable women across the UK.
But now the Budget makes no mention of where that money will go.
Women’s Budget Group Director Mary-Ann Stephenson said: “We welcome the removal of the tampon tax, but the Chancellor said nothing about what would replace it as a source of funding for violence against women and girls services, which it is estimated need £393 million a year.”
10. Brexit is taking a massive hit to the British economy
Boris Johnson ’s Brexit will slow down economic growth to the tune of £1,200 for every person in the country, the government’s spending watchdog has said.
"Brexit" appeared just twice in Chancellor Rishi Sunak’s first Budget speech despite the huge impact it’s predicted to have on the national finances.
The Office for Budget Responsibility (OBR) said based on current Brexit plans, growth would be slowed by around 4% in the long run.
They said part of the slowdown was a result of lower migration – but most was from a slump in business investment.
The body – set up by George Osborne to scrutinise Budgets – said the economy had only seen a third of the impact of Brexit so far.
Another third will happen over the next five years, and the remainder after 2025.
And… The Tories’ new immigration system will hurt economic growth
The OBR watchdog also warns the Tories’ Brexit immigration system will take a hit to GDP.
The salary cap of £25,600 will leave GDP 0.3% smaller than it would have been in 2024/25.
In fairness, though, the OBR also says this wouldn’t be a significant change compared to other factors, some of which also involve Brexit.
11. That £640bn in infrastructure spending? Most of it was already announced
The Budget goes on about a £640bn infrastructure fund which, by any stretch of the imagination, sounds very very impressive.
But actually £500bn was announced in the Tory manifesto, and the £640bn figure is a “gross” total. The actual figure is still big, but a lot less so.
Chancellor Rishi Sunak boasted of £643million to tackle rough sleeping. But when you break it down, it’s not quite as impressive.
£237million of it for 6,000 rough sleepers’ accommodation was already announced previously by Boris Johnson. The further money is £144m for “associated support services” abd £262m for drug and alcohol abuse treatment.
13. Those ‘minor’ changes to Entrepreneurs’ Relief will cost firms £6.3bn
The Tory manifesto vowed to review and reform entrepreneurs' relief – a £3bn tax break that reduces Capital Gains Tax for people selling their business.
Today the Chancellor followed through with that. He stopped short of scrapping the relief altogether, but reduced the “lifetime limit” on how much people can benefit from £10m to £1m.
In his speech he insisted 80% of firms would be unaffected.
But the small print of the Budget shows it will be a pretty big cut over all, of £6.3bn over five years and £1.8bn a year by 2024/25.
Many including on the left supported a crackdown on Entrepreneurs' Relief. But Tim Stovold, Head of Tax at Moore Kingston Smith, said: "It removes an important incentive for entrepreneurs to build a company from being worth just over £1m to being worth £10m. It is that stage of growth that can create a huge amount of jobs.”
Source: Read Full Article