Wednesday, 23 June 2010

Fair is relative

So I just about refrained from watching the budget announcement live. With about an hour delay, some parts of it were already being debated heatedly in my workplace, without the benefit/curse of certain omnipresent political commentators.

What struck me most was the comment that this budget is fair. It's an interesting term, one favoured in the election campaign by Labour, so I couldn't help but find it a bit out of place coming from our new government. I do like the rhetoric of it though, because yes, I believe in fairness for all, so bring it on.

So is it fair? There is of course also an argument about VAT. It's a tax that affects those on less income proportionately higher than those on higher incomes, because there are lots of items you simply have to buy. It is therefore a regressive tax and contributes to the situation in the UK where those on lower income pay a higher proportion of their income on tax than those on high incomes. This is a situation which I personally find appalling. On the other hand, I'm not entirely opposed to having a higher VAT rate for other reasons - mainly to reduce the ridiculous consuming that is going on in our world. Which has nothing to do with fairness of course.

I'm personally not too worried about seeing the Health in Pregnancy Grant go (though I still got it for this pregnancy and of course wouldn't not take it if offered) because I don't see a point in the general grant, which is given out from 25 weeks of pregnancy, when really, if you live unhealthily, it's too late. I also don't think a grant like this changes your diet or health in general. Because it's universal, people who don't need the extra support also get it, so fair enough, let it go.

I was pleased that the budget didn't go as far as getting rid of tax credits for family incomes of over 25K. Above 40k - well, I still think that many families, especially with more than one child under 5, in the 40-50k bracket really struggle to make ends meet, especially if they live in areas where house prices and mortgages are high. The problem is of course the cost of childcare - with £600- £800 per child full time, you need to earn a lot to make your work pay for this. My worry is that the tax credit cut combined with spending cuts in the public sector will translate to even less availability of non - private child care, so that it will hit working families with children really hard.

On the other hand, increasing the tax free allowance will help low income families (and potentially offset some of the tax credit loss for families), but of course it also means extra cash for higher earners and anyone without children. Now don't get me wrong, of course I feel that it's my duty to provide for children and I don't want everything paid for by the state, but because of the cost of childcare, even working parents on middle incomes will struggle to make ends meet. If I compare my lifestyle now with that as a childless person, I can only say that my disposable income has shrunk significantly. I'm in a well paid job, with a salary I never dreamt of when I left uni (admittedly, I was under ambitious), yet even on that salary, as a working parent, you don't go far. So I do see it as fair to have a tax free allowance per child which offsets the massive childcare costs a little bit, so that it's possible to work and have two children under 5 without making a loss. Work should pay for parents too. I don't see why childless people need an increase in tax free allowance. Honestly, I don't. A tax free allowance per child would be cheap to administer and directly offset child care costs incurred for working, thus encouraging parents to work too (which it seems is what all political parties want).

2bn were invested in the poorest families by increasing the child element tax credit to £150 above inflation, and I praise this wholeheartedly. It's not enough, but it's more than Labour did in their last budget. The only problem (see above) is that it's all taken back through the VAT rise... Shame really.

Considering that the VAT increase is going to hit the poorest harder, I would have expected some form of offset by a tax that hits the richest exclusively. However, the top rate tax rate has been fozen (boo) and apparently you don't have to pay tax on your rent income for holiday homes? Excuse me? Why not?

The announced cuts make me worry bad time, but they are hard to assess at this stage. What can be assessed is the ridiculous expectations of lone parents to take up work when their child starts school. For one, there aren't any jobs. For two, if you get a job, it sure won't offer flexible hours so you can be back home to pick up your child from school at 3pm, or take time off during school holidays or endless in service days. There are countless lone parents who want to work but have to give up their job (if they got one) in the summer because they don't have childcare for the holidays.

Finally, child benefit. So it's been frozen for 3 years. Which is not as bad as I thought the announcement might be - I had feared for it to be cut altogether. Still, my disappointment is great because once more, there was an opportunity to target a general benefit. While I appreciate that a universal benefit is easier to administer, I still think that families on high incomes don't really need this benefit if we are talking about necessary cuts. I'd rather see child benefit go up for struggling families and abolished for families with an income of say, over £75,000, than this half measure.

A fair budget then? What do you think?



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