Budget 2012: What will Osborne deliver?
Personal tax statements indicating how money will be spent and the scrapping of the 50p tax rate are expected as George Osborne promises Wednesday’s budget will be “for working people”.
Mr Osborne has promised to unveil a budget that will “help low and middle earners”.
For the first time, every taxpayer is to receive a personal statement which will detail how much of their income is paid to the state and what it is spent on.
Specimen statements prepared by the Treasury have given indications of what these will look like. This includes someone on £25,200 a year seeing £5,702.12 of their income going to the exchequer in direct taxation, with £1,900.71 of that being used for welfare.
The statement suggests that £992.91 will be used on health and £743.26 for education. Interest payments on the national debt account for £363.12, with defence taking £329.08 and police £153.19.
The statements are not likely to arrive until a year before the expected date of the next general election.
Pre-empting accusations that the budget will protect the highest earners, deputy Liberal Democrat leader Simon Hughes said his party is not committed to “hanging on” to the 50p tax as long as the richest end up paying more overall.
There has been speculation that Mr Osborne will cut the levy to 45p next year and abolish the top rate completely by the time of the next election.
50p tax rate ‘not central’ part of budget
Mr Hughes said the 50p tax rate, which applies only to those who earn more than £150,000 a year, brought in a “relatively small amount of money”.
He added: “We made it very clear that the wealthy have to pay more. The whole priority is to make sure we have a budget for the millions not the millionaires.
“A particular tax rate which affects one in 100 people who pay tax in Britain is not, therefore, for us a central aspect for the budget.”
Earlier, Labour leader Ed Miliband accused the government of being more interested in cutting taxes for the rich than helping struggling families.
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“We would be concentrating on jobs and growth and we would be using every penny of scarce resources in order to help millions of hard-pressed families who are struggling to make ends meet.
“My fear is the government is more interested in cutting taxes for people earning more than £150,000 a year,” he said.
Mr Osborne said the plan to stop child benefit payments to parents paying the 40 per cent higher rate of income tax would be clarified in the budget.
He said that while it was right that each section of society made a contribution to tackling the budget deficit, “how we implement the policy is something we will discover on Wednesday”.
Budget to ‘target pensions’
The chancellor has also been urged to avoid treating pensions “like an ATM” amid predictions that a tax raid is being planned as part of the budget.
For every 60p currently saved in a pension by a higher-rate taxpayer, the government contributes 40p in tax relief to make it up to £1, but suggestions have been made that this could be cut to around 20p.
Treasury Chief Secretary Danny Alexander says the measure would save more than £7bn.
But Association of British Insurers Director-General Otto Thoresen warned against targeting pension savings.
“At this very difficult time for savers, Osborne needs to live up to his promises and resist the temptation to view pensions as an easy, short-term hit,” he said.
‘Aggressive’ measures on stamp duty
Mr Osborne has confirmed he will target stamp duty avoidance with “aggressive” new measures in this week’s budget.
He said that using companies to buy homes was “unacceptable”.
“We are going to come down on that practice like a ton of bricks, We are coming after that tax avoidance, we are going to be extremely aggressive in dealing with it, and people are going to face a very punitive charge,” he said.
Stamp duty starts at 1 per cent of a property’s value for homes costing more than £125,000 and goes up to 5 per cent for those costing more than £1m.
‘Double standards’
Shadow chancellor Ed Balls has accused the government of “double standards”. The Labour MP said that cutting tax credits for low paid workers while relieving the tax burden on the highest earners was “crazy”.
Other measures which are widely expected to be announced in Wednesday’s budget include a reduction in fuel duty, tax breaks for British film companies and a reduction in fuel duty.
The pay cap on soldiers’ salaries is also expected to be lifted and there will also be a focus on infrastructure spending to promote growth.