MILLIONAIRES BUDGET

George Osborne’s Budget today asks millions to pay more, so millionaires can pay less.

There are 14,000 people earning £1 million or more who will receive a tax cut of over £40,000 each year courtesy of George Osborne.

By contrast, a family with children earning just £20,000 loses £253 a year from this April. This is on top of the VAT rise which is costing a family an average of £450 per year.

And this Budget includes a £3 billion tax raid on pensioners over the next four years. The freeze in the personal allowance for pensioners will see 4.5 million pensioners who pay income tax losing an average of £75 per year next April. People who turn 65 next year will lose out by £314.

The government promised change, but things have got worse not better. Their policies have failed on jobs, growth and the deficit:

One million young people are unemployed. Our economy has stalled. The OBR is predicting just 0.8% growth in 2012 compared to 2.5% forecast in last year’s Budget. And the UK is growing at half the rate of the United States.

The government is set to borrow £150 billion more than planned because of slower growth and higher unemployment.

These are the wrong priorities. Even on the government’s bogus calculations the 50p top rate of tax has raised £1 billion in its first year. The Chancellor could have used the money to cut fuel duty, reverse cuts to tax credits, reduce cuts to police officers or help pay the down the deficit – but instead he chose to cut taxes for the richest 1% of earners. This is the wrong choice from a government that is totally out of touch.

When people on middle and low incomes are being squeezed by rising fuel prices, seeing their tax credits and child benefit cut, when one million young people are out of work and there’s a big deficit to clear, it is completely the wrong priority to cut taxes for people earning over £150,000.

The Chancellor claimed this was a “Budget which rewards work.” But at the same time as cutting taxes for the very richest, the government is pressing ahead with huge cuts to tax credits for working families next month which will leave thousands of families better off quitting work and living on benefits.

TAX CUT FOR MILLIONAIRES

HMRC’s review of the 50p top rate confirms that the government is cutting taxes for the richest earners next year by £3 billion – a tax giveaway to 300,000 existing taxpayers who gain on average £10,000. They have gambled that the result of this tax cut is to get £2.9 billion back from people currently avoiding tax.

But the OBR says that “the results of the evaluation are highly uncertain”. As the Institute for Fiscal Studies has said: “If the future of the 50p rate is to be determined on the basis of evidence ...then Budget 2012 will be too soon to form a robust judgement.”

George Osborne’s review of the 50p top rate of tax only covers the first year of the new tax, which we always said would raise much less as people could bring their income forward. The question is how much will it raise in the second and third year, but George Osborne didn’t want to wait and find out – he had already made up his mind.

No tax rate should ever be set in stone. Labour will set out our tax and spending commitments at the time of the election once we know how bad the state of the economy is after five years of George Osborne. But let’s be clear, if this was a Labour Budget this week or if there was an election tomorrow we would not be cutting the top rate of tax for people earning over £150,000.

TAX RAID ON PENSIONERS

George Osborne’s announcement means that the personal allowance for over 65s is being frozen in cash terms, so that the increases in the Personal Allowance for everyone else catches up until they are the same. There are 4.77 million over 65s at the moment paying income tax who will lose out in real terms.

FAILURE ON JOBS, GROWTH AND BORROWING

A year ago the Chancellor said his Budget would ‘put fuel into the tank of the British economy’. But since then our economy has stalled, unemployment has risen month by month and he’s borrowing £150 billion more than he planned.

This Budget should have put jobs and growth first, but it will do nothing to get our stalled economy moving or get people back to work. In fact the OBR says: “We have made no other material adjustments to the economy forecast as a result of Budget 2012policy announcements.”

Despite George Osborne’s claims, he is set to borrow £150 billion more than he planned in his spending review – because his failed economic policies have delivered slower growth and higher unemployment. Trying to raise taxes and cut spending too far and too fast has backfired.

Of course there have to be tough decisions on tax, spending and pay. But we won’t get the deficit down unless we have a plan for jobs and growth to get our economy moving again and get people off the dole and into work.

What we needed in this Budget was real help for families on middle and low incomes and a real plan for jobs, like Labour’s five point plan which includes a tax on bank bonuses to fund 100,000 jobs for young people and a tax break for small firms taking on extra workers.

We also called for a fair tax cut to help families and pensioners and jump-start the economy. A temporary VAT cut is the quickest and fairest way to do this, because it will help pensioners and those on lower incomes who won’t gain a penny from an increase in the income tax personal allowance.

INCOME TAX PERSONAL ALLOWANCE RISE

The increase in the personal allowance today is outweighed by the VAT rise, cuts to tax credits and higher petrol duty. A family with children earning just £20,000 loses £253 a year from this April. This is on top of the VAT rise which is costing a family an average of £450 per year.

And of course most pensioners and people on low incomes won’t be helped at all by this policy. The government is giving with one hand, but taking lots more away with the other hand.

STAMP DUTY

There are 300,000 people benefiting each and every year from the Chancellor’s top rate tax cut. But there are just 4,000 houses sold each year for more than £2 million. So 99% of those who gain from his tax cut for the richest will be totally unaffected by his rise in stamp duty, and get a massive windfall from this Chancellor.

TAX AVOIDANCE

Every Budget should clamp down on tax avoidance and close loopholes – that’s the Chancellor’s job. But why isn’t all the money raised being used to ease the squeeze on families on middle and low incomes, rather than giving a tax cut to the very richest?

BORROWING FIGURES

Whatever today’s figures show, George Osborne is already billions of pounds off track on his borrowing plans. He is set to borrow £150 billion more than planned because of the lower growth and higher unemployment his failed policies have delivered.

ANNUAL TAX STATEMENTS

This seems like a sensible idea, but it will be important to keep the costs of sending this out to every taxpayer down. And of course the statement will not show things like higher VAT and that the government is borrowing £150 billion more than they planned.

CHILD BENEFIT

The changes are a small step forward, but it does not change the fundamental unfairness of these changes. A one earner family on £55,000 would lose much of their child benefit, while a couple on as much as £99,000 could keep it all.