Britain's 'millionaire' budget eases taxes on the rich

Britain released its annual budget yesterday, which includes a tax cut for the country's biggest earners – but also eliminates taxes for Britain's lowest earners. 

|
Neil Hall/Reuters
Britain's Chancellor of the Exchequer George Osborne leaves a television studio after giving post-budget interviews in central London on Thursday.

Britain's top financial official cut the tax rate of the country’s biggest earners in the annual budget released yesterday, prompting sharp condemnation of “a millionaire’s budget” from the opposition Labour party.

Chancellor of the Exchequer George Osborne reduced the income tax rate of those who earn more than £150,000 ($237,000) a year from 50 percent to 45 percent. The previous Labour government had introduced the tax, arguing that squeezing the rich was a fair way of paying for Britain’s services.

The Conservative-led coalition did strive to appear even-handed, though. It increased the amount a person is able to earn without paying income tax by £1,100 ($1,738), bringing it to £9,205 ($14,500) – a move that is estimated to excuse an additional 840,000 people from paying tax altogether. 

Taxation was the main focus of Osborne’s budget this year, following deep spending cuts in the previous budget that slashed welfare benefits and government spending across a number of departments. The government’s core objective is erasing a huge budget deficit that topped more than 11 percent of GDP when the Conservative-Liberal Democrat coalition came to power in 2010.

Osborne's budget also includes new ways of prying money from the wealthy, including a new 7 percent “stamp duty” levied on buyers of properties worth more than £2 million ($3.16 million).

A director of a small business in London who did not want to be named said while the new stamp duty would affect only what he considered the “super rich,” the cut in the highest rate of income tax would cheer many people who considered themselves middle class. 

He estimated that the cut would save him £2,450 a year. Many foreigners find Britain's high taxes off-putting and high-earning Brits are often keen to work in countries like the United States, “where there’s so much more encouragement of wealth creation.”

Osborne was keen to stress that the richest would still be paying up, despite the income tax drop.

"We'll be getting five times more money each and every year from the wealthiest in our society," he said, in a statement read to parliament.

'Tax grab on Grannies'

The biggest single money-making measure in his budget, however, is a freeze on tax allowances for pensioners. Freezing these will swell the government’s coffers by around £1 billion ($1.58 billion) by 2016 – but the move was swiftly criticized by Labor, which said it was a “tax grab on grannies.” 

Saga, a company that provides services including holidays for people older than 50, described the move as “an outrageous assault on decent middle-class pensioners.” It said 4.4 million people older than 65 would lose £83 ($131) a year.

Some analysts, however, have noted that although the freeze is unpopular, it brings pensioners, who have so far suffered little from the extensive welfare cuts that have hit most of the populace, into line with other taxpayers.

There was good news for families: the cut-off salary point for those receiving “child benefit” – a weekly handout given to families with children – was raised from an originally planned and controversial £42,475 ($67,110) to £60,000 ($94,800).

Business also got a leg-up with a 2 percent cut to corporate tax, bringing it to 22 percent – described by Osborne as “an advertisement for investment and jobs in Britain.”

GlaxoSmithKline, a pharmaceuticals maker, announced Thursday plans to build its first factory in Britain in 40 years, at a cost of 350 million pounds ($553 million) – a direct result of the cut in corporation tax. 

Speaking more generally of the economic outlook, the chancellor said that Britain was on track to avoid sliding back into recession and that while growth this year would be modest, it would pick up the year after.

The Office for Budget Responsibility said the economy had a “little more momentum” this year and revised its growth forecast from 0.7 percent to 0.8 percent in 2012 and 3 percent in 2015.

This morning, however, there was less good news: all-important retail sales fell by 0.8 percent in February, twice the drop expected, according to the Office for National Statistics.

The austerity drive would continue, Osborne warned yesterday. “This country borrowed its way into trouble. Now we’re going to earn our way out”, he said.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Britain's 'millionaire' budget eases taxes on the rich
Read this article in
https://www.csmonitor.com/World/Europe/2012/0322/Britain-s-millionaire-budget-eases-taxes-on-the-rich
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe