CHANCELLOR George Osborne delivered a £1 billion Budget tax hit to pensioners as he cut the top rate of tax for Britain’s wealthiest earners.
The Treasury acknowledged that 4.5 million pensioners would lose out as a result of the decision to phase out their additional age-related allowances.
Age UK said it was “disappointed” with the move warning that it could leave some pensioners up to £259-a-year worse off, with little chance to change their retirement plan.
However, Treasury sources pointed to a report by the Office for Tax Simplification which claimed many pensioners did not understand the allowances and found actually claiming them “burdensome”.
Mr Osborne presented his statement as a Budget that “supports working families” – lifting another 840,000 of the low paid out of taxation as he raised the income tax threshold to £9,205.
His widely expected cut in the top rate of income tax for earners on over £150,000 from 50p to 45p was offset by a hike in stamp duty on properties worth over £2 million and a commitment to clampdown on “aggressive” tax avoidance.
However, it threatened to be overshadowed by the row over the phasing out of age-related allowances.
Although Mr Osborne insisted there would be no cash loss to pensioners, Treasury sources said existing pensioners would be, on average, £63 a year worse off while new pensioners would lose out to the tune of £197 a year on average.
Mr Osborne also signalled that millions of existing workers will have to wait longer for their pensions, with automatic reviews of the state pension age “to ensure it keeps pace with increases in longevity”.
And he also warned of new cuts to welfare payments – with the need to find additional savings of £10 billion by 2016.
However there was action to ease the effects of his decision to end child benefit for the better off, with a phased withdrawal of payments for those on incomes between £50,000 and £60,000.
Overall, the Chancellor said his measures would raise five times more from the wealthy than the top rate introduced by Labour.
But Labour leader Ed Miliband said the Budget meant millions would pay more while millionaires paid less.
“It is a millionaires’ budget that squeezes the middle,” he said.
Treasury sources said it was a fiscally “neutral” Budget with the £2 billion in tax cuts paid for by a £2.4 billion reduction in the cost of operations in Afghanistan – funded from the Treasury reserve – as the troops return home by the end of 2014.
Inflation forecast to fall from 2.8% this year to 1.9% next year.
Unemployment expected to peak at 8.7%
State pension age to be automatically reviewed to ensure it keeps up with growing longevity.
Single-tier state pension to be introduced - estimated to be £140.
Tax credits for video games, animation and TV production
Headline rate of corporation tax to be cut to 24%.
Legislation for relaxed Sunday trading laws on eight Sundays during Olympics and Paralympics, starting July 22.
No change in alcohol duty meaning price rises will come in next week.
Duty on all tobacco products to rise by 5% above inflation from 6pm tonight - 37p on a packet of cigarettes.
New duty on gaming machines.
Stamp duty charge on properties above £2 million through a company to rise immediately to 15%.
Fair fuel stabiliser means above-inflation rises in fuel duty will return only if price of oil falls below £45 a barrel.
Vehicle excise duty to rise by rate of inflation but frozen for road hauliers.
Top rate to be reduced from 50p to 45p from April 2013.
Personal tax allowances to rise by £1,100 from next April. Tax-free allowance to rise to £9,205, making 24m people £220 a year better off.
Child benefit to be reduced incrementally when one member of household earns more than £50,000. Child benefit will be removed completely at £60,000.
The local shopfloor verdict
THE Chancellor has given with one hand and taken away with the other.
That was the general view of yesterday’s budget from workers and directors at Sellers Engineers on Leeds Road.
While the rise in personal income tax threshold to £9,205 from April 2013 was broadly welcomed, the Sellers personnel felt that it would be swallowed up by other taxes.
Martin Cullimore, head of the fabrication shop, 50, of St Albans Avenue, Ainley Top, said: “Why does it take until April 2013 for the tax breaks to come in? The tax increases are being introduced much quicker.
“There has been no relief on fuel duty; the 3p rise is still due in August. I would have liked to have seen a reduction in it, as well as the pension age down to 65 and more incentives for business.”
His thoughts on fuel prices were echoed by machine shop engineer Thomas Beaumont 23, of Wakefield Road, Denby Dale.
He said: “I have a 26-mile trip to work and back and travel to play rugby at weekends. I spent a lot of money on fuel, so the fact that there is not going to be a reduction in fuel duty is disappointing.
“I used to go out drinking quite a bit, but now I nip to the supermarket for beer and have friends round instead. The economy has definitely affected my lifestyle.”
Chargehand Richard Cockin, 40, of Scar Lane, Milnsbridge, said: “With this budget, I think we will be about the same as before.”
He added that he used to regularly go to the pub at weekends, but could now only afford to go about once a month.
Senior engineer Kevin Miller, 55, of Moor Close, Beaumont Park, smokes a packet or more of cigarettes a day. The 37p rise announced in the budget will take the cost of a packet of 20 cigarettes to around £8.
He said: “We were never going to be happy with another increase, but if I bought all my cigarettes in England, I’d have to stop.
“I buy my cigarettes abroad on holiday and most people I know do the same or are now using hand rolling tobacco to save money. The government is losing revenue because so many people are doing this now.”
Receptionist Judi Whittaker, of Elder Mews, Shelley, said: “We are playing catch up all the time. Petrol, food prices and utility bills are all going up. Any relief on tax will be wiped out by everything increasing in price.
“Unemployment is a worry for everyone, nothing is secure and prospects for the over-50s are gloomy. We are lucky to work for a secure company and have a job at the moment, but there are no guarantees.”
Director Ian Shaw, 57, of Briarlyn Avenue, Birchencliffe, described the budget as “nondescript”. He said: “I don’t have a problem with the 50p of tax rate being cut to 45p. The information is that we have lost two thirds of the tax income from the higher tax payer since the 50p rate was introduced.
“Bringing the rate down will hopefully bring in more revenue, which will be beneficial. I absolutely welcome the clampdown on tax avoiders.
Sellers chairman David Armitage said: “It is great they are reducing Corporation Tax for big business, but there is absolutely nothing in this budget for small and medium-sized businesses. If they wanted to help, the government should have cut the employers’ 13% National Insurance contributions.
“Most people are on a knife edge. Prices are going up, regardless of what the government says.
“We have failed to achieve one quarter projection; all the forecasts have been wrong. The government is beating the drum, which is right, but I don’t think we will achieve targets for growth.”
THE vibrant micro brewing community will not be as hard hit as its national counterparts by the 2% rise above inflation.
John Broadbent, of Golcar Brewery, said: “The 5.4% rise is on duty payable, not on the overall cost of beer. Micro brewers only pay half the rate of duty that national brewers pay”.
Andy Baker of Summer Wine Brewery said: “It was not a shock. Although it is never pleasant news, it was to be expected.”
The local business verdict
CHANCELLOR George Osborne has delivered “a decent business budget”.
That was the verdict of Steven Leigh, head of policy at the Huddersfield-based Mid Yorkshire Chamber of Commerce.
Mr Leigh welcomed measures to pump more money into the Yorkshire region’s railways and a 1% cut in corporation tax to help the UK become more competitive as a world economy.
He praised the chancellor for pledging not to impose above-inflation rises in fuel duty unless the price of oil falls below £45 a barrel.
Mr Leigh said he was disappointed that there were no measures to help encourage employers to take on young workers, but said: “All in all it is a decent business budget. He could have done more, but we accept he has not got a lot of money to play with.”
Andrew Palmer, Yorkshire director for employers’ body the CBI, said the Chancellor had provided a much-needed confidence boost by putting more money in the pockets of ordinary people.
He added: “The Chancellor has also painted a clearer vision of how the UK will earn its living in the future and – by seizing the opportunity to make sure our corporate tax system is more internationally competitive – he has sent a powerful signal to companies to invest, do business and create jobs in the UK.
“An extra 1% off corporation tax this year could make a big difference to investment intentions. Plans to reduce the top rate of tax to 45p by April, 2013, will show our top and aspiring talent that this Government wants them to create wealth here.”
Colne Valley MP Jason McCartney said there were lots of positives for Yorkshire, including an increase in personal tax allowances which would take an extra 74,000 people in the region out of income tax; an extra £13m funding for rail improvements in the region; and £14.6m for ultra-fast broadband.
Said Mr McCartney: “It shows that the chancellor is listening when he meets the Yorkshire MPs group.”
David Butterworth, of Huddersfield chartered accountants Wheawill & Sudworth, also welcomed the chancellor’s support for businesses.
He said: “The further cuts in corporation tax are good news as is the simplified reporting and tax system for smaller companies. It’s a shame that the fall in the higher rate of income tax to 45p is being delayed to next year along with the higher personal tax allowance of £9,205.”
However, Nick Brook, of Lockwood-based TaxAssist Accountants, claimed small firms in Huddersfield would see very little change as a result of the budget. “We knew there was very little scope for the Chancellor, but this was not a budget for sole traders and small firms across Huddersfield
“The cut in corporation tax to 24% only applies to firms with profits of over £300,000. The majority of small businesses will have nowhere near that figure – but there is no cut in the 20% rate they pay.”