The Chancellor's 2008 Budget
Chancellor Alistair Darling today announced what he would be giving or taking away from us in his first Budget, having taken over the now Prime Minister, Gordon Brown.
The UK economy is undoubtedly in trouble and Chancellor Darling stated that his core aim was to maintain stability now and in the future and stated that current problems were not limited to the UK but that there was a global economy slowdown in every country in 2008. The UK has a central role in the financial system and would obviously not be exempt from these events, but with low inflation, record numbers of employment and unemployment at its lowest levels (lower than in France, Germany and Italy) and with the action that was taken last year by the then Chancellor Gordon Brown, the UK is now better placed than other economies to withstand the slowdown of the global economy. The Chancellor's aim would be keeping inflation and interest rates low and maintaining the country's record of growth. He stated that whilst other countries suffered recessions, the British economy has now been growing for more than a decade and would continue to grow for many years to come.
He told the Deputy Speaker that he was determined to equip the country for the challenges of the future which most importantly was to confront climate change, to end child poverty in a generation and to allow everyone to exploit their full potential.
The globalisation of financial problems in one part of the World, namely the US mortgage market in the present case, has shown how it has affected all economies from the USA to Asia, as well as Europe. Reforms within the British economy has meant that Britain is better placed than other countries to withstand a slowdown. Across the World countries including Japan and China have lowered their forecast for the coming year, and the British economy would also have a reduced level at between 1.75% and 2.25%, but it would still be greater than other economies such as Japan, the USA and Europe.
The Chancellor stated that public spending would be predicted to increase by 2.2% in the next three years and that there had been a 90% increase in the number of people using public transport. He stated that hospital waiting lists had gone down and that the number of school places available were increasing allowing every child to be able to put their aspirations into practise. Which linked into eradicating child poverty by 2020 by supporting parents and helping them find work and improve their situations. From 2009, parents would be better off in work than on benefits, gaining £70 a week which would help lift children out of poverty. From April 2009, he stated that child benefit provided for the first child would be raised to £20 a week, a year earlier than planned. Working families would benefit from this year's Budget since those with earnings up to £28,000 would be £130 better off due to extra funds. With these as well as encouraging more people to save money (cash savings limit raised to £3600 and ISA limit to £7600) he hoped to raise ambition and provide greater opportunity for all people. From 2010, all those on incapacity benefits would have to attend work assessments to try and help those that wanted work and to remove benefits from the minority of people abusing the system.
A reduction in mortgage rates would be attempted as soon as possible and the Chancellor hoped that more people would have the choice of a long-term fixed mortgage to protect borrowers from risk especially low earning families and first-time buyers, and provide them with the flexibility to move and to change their mortgage if rates were reduced. He said building more homes would be a way forward.
To help the environment and lower the country's CO2 emissions, the Chancellor suggested a new bag tax by 2009 if the voluntary action by stores was not sufficient to dissuade people from using plastic bags. From April 2008, energy companies will be obliged to give their customers more energy efficient options and therefore, also cut bills. Wall and loft insulation and more energy efficient appliances were also mentioned with £26 million being provided for the green homes service would be provided in 2009 to help people cut their CO2 emissions and their fuel bills.
Mr Alistair Darling stated that there would be tighter targets on car CO2 emissions with currently acceptable levels being 130g of CO2. From 2009, the more environmentally efficient cars would pay no tax in their first year whereas, the more polluting cars would be punished and as such would pay a much higher car tax. All these would come into action in April 2009. Fuel duty would rise again by 2p/litre but because he wanted to support the economy and help businesses and families, that would be postponed until October 2008. A further 0.5p rise would occur in 2010 though.
Duty on tobacco would rise by 11p per packet of 20 cigarettes and 4p on a packet of cigars. Duty on alcohol will increase by 6% above inflation with duty increasing by 2% above the rate of inflation in each of the next four years. Pensioners have gained more help by Winter fuel payments being increased from £200 to £250 for over 60s and from £300 to £400 for people over 80 years of age.
Basic rate of income tax would fall by 2p in April 2008, but Chancellor Alistair Darling stated that there would be no further changes on capitals gains tax or non-domiciled residents.
We are already feeling the pinch but some of us will find that it will be harder to balance our savings for all expenditures in our lives.
The Overall Budget Effects
- increased numbers of houses being built with people having assess to long-term fixes mortgages
- duty on alcohol of 6% above inflation this year and a further 2% every year for the next four years.
- duty on tabacco would go up; 11p per pack of 20 cigarettes and 4p for a pack of 5 cigars
- there will be a 2p increase in fuel duty but this will only come into effect from October 2008. A further rise will occur of 0.5p in 2010.
- Winter fuel allowance will go up by £50 for the over 60s and by £100 for the over 80s.
- Child benefit will increase to £20 a week from 2009.
- If by 2009 stores are not charging for plastic bags, a bag tax will be brought in.
- £26 million provided towards helping people make their homes more environmentally friendly and to save them money on their utility bills.
- Harsher targets on car fuel emissions.
- Cash ISA limits increased to £3600 from April 2008.
- The most polluting new vehicles can face up to £950 tax charge from 2010.
- Capital gains tax will remain at 10% for small businesses.
by Dr Judith Juhasz for Whatprice.co.uk
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" THE BUDGET the working man as usual punished for keeping one parent families and those not prepared to work!"