2012 Budget

THE budget is always a challenge, with winners and losers on all sides and this year it is just as controversial as ever. On 21 March 2012, The Chancellor of the Exchequer, George Osborne has told the House of Commons what the Budget for 2012 is for the year ahead. The new UK Budget sees both drinkers and smokers feeling the pain, as he attempts to balance the books by offsetting the loss of revenue resulting from raising the income tax threshold for millions of workers. It is thought this rise in the income tax threshold will cost the Treasury £3bn a year. The Chancellor confirmed that there will be further rises in duty on no change in alcohol duty and it will be further rises in duty on cigarettes and alcohol. So no surprise CAMRA has launched a campaign against it, saying: - "Beer drinkers rocked by tax man swallowing a 3rd of every pint!" and are asking its members and the public to back e-petition to scrap beer tax escalator.

2012 budget identified broadband as one of the government's 4 major infrastructure priorities, alongside railways, roads, water and clean energy. Yet critics say the promised improvements fall short of the investment needed to compete with better infrastructure abroad. So in part of his budget speech, Chancellor George Osborne announced that the new £50 million fund that has been created to bring ultra-fast broadband to additional, as yet unnamed, UK cities would be going to help ten winning cities to become "ultrafast broadband cities." In 2011 Liverpool was declared the 5th slowest 3G mobile broadband cities by Top10.com, yet it has one of the most active areas in Europe for digital development and programming, so a lot of attention was focused via Merseyside businesses on the governments ambitious plans for 'digital city'. Liverpool was not listed in the 10 and worryingly now Birmingham, Bradford, Bristol, Leeds, Manchester, and Newcastle are now being promised ultrafast broadband speeds. Will Liverpool lose out again to Manchester? Yet in his budget speech, Osborne also announced that a further £50 million fund would be created to bring ultra-fast broadband to additional, as yet unnamed, UK cities. So Liverpool might still get help, unfortunately details were scant as to who can apply and what would be needed to be submitted in any applications for funding, if required. Is hope still there for Liverpool's internet future? On a positive note for Liverpool's digital future, the "Video Games Tax Relief" will also benefit significant industries in both Liverpool and Manchester.

Also affecting Liverpool and its surrounding areas was another increase in the damaging Air Passenger Duty (APD). Peel Airports, owners of Liverpool John Lennon Airport and Robin Hood Airport Doncaster Sheffield, believes that the Government has yet again turned its back on an industry that has the ability to help kick-start regional and national economies. Craig Richmond CEO of Peel Airports Limited commented:- "It never ceases to amaze me that a Government that 'talks the talk' about a budget that backs business, can at the same time fail to 'walk the walk' by then doing the opposite. We should be talking about scrapping APD completely if we want any chance of helping the aviation industry to generate improvements to the economy through more jobs, more investment and more visitors to the UK, yet here we are facing increases both this year and next. Our European competitors will undoubtedly be celebrating this news."

Peel Airports also echoed the sentiments of the CEO's of easyJet, Ryanair, IAG and Virgin Atlantic who have expressed their own dismay at the Chancellor's budget increases for APD.

Carolyn McCall of easyJet, Willie Walsh of IAG, Michael O'Leary of Ryanair and Steve Ridgeway of Virgin Atlantic, jointly said:- "At a time when the Government talks about creating jobs and growth, its blinkered insistence on further increases in Air Passenger Duty achieves precisely the opposite. Youth unemployment is at record levels. Inbound tourism is a major employer of young people, but international visitors are being turned off the UK because of the exorbitant level of APD - which is by far the highest air travel tax in the world."

Craig Richmond added: - "We strongly support these comments made by airline CEO's. APD will continue to damage the economy and the chances of turning the situation around in the short term."

The Forum of Private Business Chief Executive, Phil Orford in responding to the Budget also issued a statement that highlighted their concerns, but also welcome some of the budget saying that:- "We welcome several measures on taxation as steps towards creating a tax system conducive to small business success, rather than a barrier to it. Also the Forum insists smallest firms must benefit from new National Loan Guarantee and Business Finance Partnership schemes." You can read in the related item in this week's issue by clicking here.

The Royal Institution of Chartered Surveyors (RICS) has said that:- "The RICS is pleased to see the Chancellor move to get small businesses building and growing again. The National Loan Guarantee Scheme, more money for the Get Britain Building Fund and streamlining the planning system are all welcome measures that should combat the growing scepticism in the construction sector and the view that SMEs are being squeezed. The Chancellor has tried to address improving access to the mortgage market with NewBuy but amidst cracking down on stamp duty avoidance and introducing a new rate of Stamp Duty, he has missed an opportunity to reform the whole stamp duty system rather than just tampering at the edges. By replacing the slab structure with a marginal system, he could have ensured that those at the top end of the market contribute fairly as well as helping those struggling to get onto the property ladder. London is still the only region where more surveyors are reporting price rises than falls reflecting the growing north/south divide. Progress on projects in the National Infrastructure Plan, particularly the 40 'shovel ready' projects, needs to take place as quickly as possible to begin to attract the infrastructure and the homes needed to deliver growth across the country. Whilst credit-easing and the Get Britain Building Fund will take effect immediately, other initiatives like infrastructure development will take longer to feed through. RICS would have liked to have seen a reduction in VAT to 5% on all homes, maintenance and repair work and a reinstatement of empty property rate relief up to £18,000 as immediate measures to generate jobs and growth now."

On the youth job market side, commenting on the Budget announcement that the Government is exploring the idea of Youth Enterprise Loans, Catherine Marchant, Interim Chief Executive of Young Enterprise said:- "We welcome this fantastic initiative by the Government. It could help thousands of young people, who at school or college have run businesses with Young Enterprise, realise their dreams of becoming real-life entrepreneurs. We are delighted to have been part of the discussions leading to this announcement and will continue to work with Ministers and the National Young Enterprise Working Group to throw our powerful network of 5,000 business mentors behind the scheme to help transform the lives of Britain's talented young people."

When it came to personal tax allowance and pensions, it was just as mixed reaction. As part of the Budget, the Chancellor has announced that from next year, the Income Tax threshold will be raised further, ensuring that no one pays any income tax on the first £9,200 they earn. In North West England that means 230,000 will be lifted out of paying Income Tax all together and a further 2.5 million will receive a £220 tax cut. This is on top of tax cuts of £200 last year and a further £130 next month.

Paul Kenny GMB General Secretary said:- "In this budget the different treatment of people at either end of the income scale is stark. Ordinary families are losing their tax credits and child allowances and suffering pay freezes while people on top salaries of £150,000 to £1m a year are getting cash hand outs from the Government. So much for the perception of shared sacrifice. The claim that it is necessary to boost the take home pay of those on top salaries to get the economy moving while cutting the pay of the lowest paid to achieve the same result is total and arrant nonsense. Regional pay for public sector workers is part and parcel of the same nonsense and will be very damaging to regional economies. The big picture is that the gamble this Tory Liberal Government took on the economy has not come off. The US economy which stuck with fiscal and monetary policy to promote recovery is now growing again and unemployment is falling while the UK Government decision 2 years ago to cut spending has led us in the opposite direction. This has added £ billions unnecessarily to the deficit. Only those with faith based economic theories would think that the loss of 381,000 public sector jobs which has already happened since general election adding to the dole queues in the middle of the worst recession in 80 years is the road to economic recovery. Osborne has as much economic nous as a stick or rhubarb."

Danny Jatania, a consumer champion and CEO and Chairman of Pockit said:- "The Budget was focused towards being 'growth friendly', with emphasis placed on the private sector growth and creating jobs. However, there is a noticeable sense of disappointment that the Chancellor didn't sufficiently tackle the issue of the rising cost of living that households across Britain are facing. The budget failed to make lower income earners a priority. With inflation decreasing, yet the cost of living increasing, the budget did nothing to help households to manage the escalating cost of food and energy. Generally it seems that the Budget focus was on overall growth of the economy; however growth can't fully be achieved without an increase in consumer confidence and consumer spending power. A much stronger economy will hinge on whether people are encouraged to spend again at the tills. Consumers don't yet have a large enough incentive to do that."

Commenting on the budget, Chris Aitken, Head of Financial Planning at Investec Wealth & Investment said:- "For us, the most important part of the budget was what it didn't contain, namely the reduction of tax relief on pension contributions for higher rate taxpayers. We have an ageing population. To abolish this incentive to save for the future would be idiotic. The Government seems to have come to its senses on this, but we note that as ever the wording of the Chancellor's statement gives him the wriggle room to come back to it. Our message to George Osborne is simple; if you have the thought again go and sit in a dark room until it goes away."

Commenting on the Budget, North West Liberal Democrat Chris Davies MEP said:- "The Chancellor has done the right thing in listening to Liberal Democrat calls for the Income Tax threshold to be raised further. As a Liberal Democrat, I want to see a fairer tax system where help is provided for those who need it most and where the richest pay their fair share. Raising the Income Tax threshold to £9,205 will help average working people in Southport who have been struggling with bills and higher cost of living. The infrastructure investment in the North West announced today will benefit thousands of my constituents and help economic growth in the region. None of this would be possible without the Liberal Democrats in Government."

Commenting further, Liberal Democrat Chief Secretary to the Treasury, Danny Alexander said:- "Liberal Democrats have been clear in our priorities for the Budget. We wanted to see a Budget for the millions, not the millionaires. The Coalition Government inherited an unfair tax system from Labour, who in their 13 years hit ordinary working families hardest by abolishing the 10p tax rate while letting tycoons get away with shameless tax avoidance. Liberal Democrats in the Coalition Government are doing the right thing to clear up the mess Labour left behind, making sure the wealthiest pay their fair share by clamping down on tax avoidance, introducing a 'tycoon tax' and putting an end to stamp duty dodging by the super rich. Raising the Income Tax threshold is a key Liberal Democrat commitment that the Coalition Government is implementing. The announcement in the Budget will mean almost 2m people will be taken out of paying Income Tax all together in the UK and give nearly 21m people a £220 tax cut."

So will the Budget affect you in a good way or a bad way, let us know by emailing us to:- news24@southportreporter.com.