BRITISH CHANCELLOR of the exchequer George Osborne has taken a major gamble following a budget decision to cut taxes for high earners and companies while taking £3 billion worth of tax allowances from pensioners.
Insisting that the top rate tax cut for those earning more than £150,000 will cost just £100 million a year, Mr Osborne insisted he could not justify a tax that failed to raise money and frightened off high earners from living in the UK.
Because of changes to stamp duty on homes bought by the rich using offshore companies, and those worth more than £2 million, he said he would raise five times more from the rich than he has given away, a claim ridiculed by Labour’s Ed Miliband.
The changes to the higher personal income tax allowance for those on pensions was the surprise of the budget and caused considerable nervousness among government backbenchers.
The allowances, currently worth more than £2,400 for pensioners, will not be given to new pensioners retiring from April 2013, while those already on pension will see their allowance frozen until it comes in line with the one generally available to all taxpayers.
Saying that he was “unashamedly’’ backing business, Mr Osborne told MPs he would not waver from dealing with the UK’s debt, while remaining “on the side of aspiration, those who want to do better for themselves and their families”.
Nearly 800,000 workers will no longer pay tax once allowances rise by £1,100 to £9,025 in April 2013, which, he said, is “the best way to support working people on the lowest incomes”. However, 300,000 more people will pay enter the 40p band, because its entry threshold is being lowered.
Meanwhile, he has rowed back on plans to cut child benefit, which would have seen single-income families lose the payment at £43,000, while two income families would not lose until they earned more than £86,000.
Instead, the threshold has been raised to £50,000, with the benefit tapering off subsequently. This means that only those single-income families earning more than £60,000 a year will lose the non-means tested benefit entirely.
Mr Osborne has decided to accelerate the cuts to the UK’s corporation tax rate. It will fall to 24 per cent next month, one percentage point more than had previously announced, before dropping to 22 per cent by 2014. A 20 per cent rate is now in view, Mr Osborne declared.
Some of Mr Osborne’s measures will be paid for by a £2.4 billion a year saving to be made from the winding down of British army operations in Afghanistan, while a further £1 billion a year will come from a counter-attack on “morally repugnant” tax avoidance.
Luxury homes will be subject to stamp duty, he vowed. Currently, many super-rich people buying London homes evade the duty by using offshore companies. Mr Osborne is set to levy a 15 per cent penalty on any such company. Meanwhile, stamp duty on homes valued at £2 million or more will rise to 7 per cent.
Saying that Mr Osborne had delivered a tax cut for “his Christmas card list”, Labour leader Ed Miliband compared the cabinet to the cast of Downton Abbey: “We all know it’s a costume drama; they think it’s a fly-on-the-wall documentary.”
