What to expect when George Osborne is at the dispatch box today.
A higher personal tax allowance
There is a strong chance that George Osborne will announce an increase in the personal allowance today from £10,000 to £10,500. Contrary to coalition spin, this isn’t as progressive as it sounds; nor, considering Osborne is unlikely to reduce the basic rate limit at which 40 per cent tax kicks in, is it particularly aimed at low earners. As the graph demonstrates, the further up the income scale you go the more people tend to benefit from the measure.
Marriage tax allowance
Red meat for the Tory right, the chancellor is likely to go into a bit more detail about the Married Couples Allowance today. The policy means that, from April 2015, up to £1,000 of the income tax personal allowance will be transferable between adults who are married or in a civil partnership at a cost of around £700 million a year to the exchequer. The policy will allow an individual not using all of their £10,230 income tax personal allowance – because their income is less than the allowance, for example – to transfer up to £1,000 of the unused allowance to their partner.
Unfortunately, just 28 per cent of couples in a marriage or civil partnership will benefit from the policy – and those who are single or unmarried will obviously get nothing from it either.
Under plans announced by Nick Clegg yesterday, parents will receive a voucher to cover £2,000 of their childcare costs. The new scheme will be introduced from Autumn 2015 and families earning up to £298,000 will be elligible. Unfortunately, families with a child born before September 2010 will almost certainly lose out as the scheme will initially cover only under-fives.
Help to buy extended
Help to Buy will be entended until 2020 for new homes. The chancellor hopes that around 120,000 new homes will be funded as a result. Help to Buy remains highly controversial, however. The chief economist of the Institute of Directors (IoD) has called the scheme “dangerous” and David Cameron’s housing advisor has said risks “detonating a bomb under the British economy”.
New ‘garden city’ at Ebbsfleet
George Osborne has already indicated that he will use his budget speech to announce the creation of Britain’s first ‘garden city’ in Ebbsflett, Kent. According to the government, the plans will result in 15,000 new homes. The problem is that this isn’t a new announcement. Back in 2012 the government made another announcement on house building. Or more specifically, an announcement on the building of 22,600 new homes in…Ebbsfleet. Thus far only 150 new homes have materialised.
100,000 new apprenticeships
The Apprenticeship Grant will be extended to 2015-16, with an aim to provide 100,000 placements. This is a welcome measure but the coalition’s record on apprenticeships thus far is mixed. Evidence recently emerged that one in five apprentices are not receiving training and many are not being paid. Despite an increase in the number of available apprenticeships in the past year, research suggests there are still 12 applications for every position.
A change in the 40p tax rate
This may not happen, but George Osborne has come under increasing pressure from the Tory right to help the so-called ‘squeezed middle’ by increasing the 40p tax threshold. And there is a good chance he will up it by around 1 per cent today. The problem is that doing so won’t really benefit the ‘squeezed middle’ so much as the well off. By far the biggest gainers from an increase in the 40p threshold are families in the top income decile, as the below graph demonstrates.
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