Huge corporations that make billions in profits will pay the same tax rate as the people who clean their offices.
That was what bungling baron George Osborne announced in his budget last week.
The chancellor cut corporation tax – a tax on profits—by 1 percent, taking it to 20 percent. As Osborne boasted, it is “the lowest business tax of any major economy in the world.”
The same tax on profits was 52 percent under Margaret Thatcher.
That measure alone costs £900 million and it will come from extra cuts.
It’s only the tip of the cuts iceberg. The Tories want £11.5 billion more in cuts by this time next year. That’s £1.5 billion more than they previously said.
And Osborne says he’s managed to cut an extra £11 million above what he had planned last year.
But his claims and sums for the economy are a mess. He insists that there are a “record number of people in work”.
But unemployment went up by 7,000 according to official statistics announced on the same day.
He said the office for made up statistics, or the Office for Budget Responsibility (OBR) as it prefers to be called, “have today sharply revised down their future growth forecast for the eurozone, and expect it will remain in recession throughout this year.”
But the OBR has been mistaken many times, as the graphs above show.
It has had to revise its forecasts on real wage increases. This is to account for the dip in real wages this year because of the government’s pay freeze and the rising rate of inflation.
Its record on growth prediction is just as shabby. While it predicted a relatively smooth rate of growth in 2010, its latest figures have tried to compensate for the dramatic dip in 2012.
This is based on a yet another revision of its previous predictions.
In the year to December 2012 the deficit was £103 billion – £12 billion higher than it was for previous 12 months.
Each time he stands up to announce cuts he claims that at some point in the future the economy will improve. Each time he is wrong.
So the official forecast for growth in the UK economy this year has been halved. The reality is far worse.
Osborne pronounced, “Britain is open for business”.
He claimed his budget was fiscally neutral. What that means is that every tax cut for the rich is paid for with spending cuts for us.
He also cut national insurance payments for employers with an increased £2,000 allowance.
Some 450,000 companies won’t pay any national insurance contributions at all. But workers will pay more national insurance from 2016.
Even those proposals that are supposed to benefit workers benefit the richest more.
So increasing the tax-free income allowance to £10,000 from 2014 will mean a gain of just £2 a week for most people.
Workers will be worse off
Teachers, NHS staff and other public sector workers face a fifth year of real-term pay cuts after Osborne extended the cap on wages.
Average salaries will rise by just 1 percent in 2015-16, way below the rate of inflation.
These workers currently get pay rises along a sliding scale for their pay grade, as long as they meet career appraisals.
This scheme is going to be scrapped.
The Treasury is also pushing for any grade increase rises to be included in his 1 percent pay cap. That makes the pay “rises” worth even less.
New research by the TUC has shown that the government’s changes to personal allowances are wiped out by its VAT policy.
The report states that by the time of the next election, low?paid workers will be losing up to four times more per year from the government's increase in VAT than they will gain from the raising of the personal tax allowance to £10,000.
The very poorest families will be hit by a 6.3 percent drop in household income.
For people already living on an average of £53.81 a week, this is a massive blow.
Tax cuts for top 13,000
Millionaires will enjoy a gift?wrapped tax cut of £42,500 upwards each from 6 April.
The handout goes to 13,000 of Britain’s richest people.
They will benefit from a 5p cut in the top income tax rate from 50p to 45p for those on more than £150,000 a year.
Buy 350 pints, get one free
The Tories cheered the cut of 1p of a pint of beer.
The change means that if you buy 350 pints you get one free (450 if you live in London).
They also cheered the cut in petrol duty.
Osborne said it would be £7 cheaper to fill up a Vauxhall.
He forgot to say it will be £30 cheaper to fill up a Bentley. But no one needs to be told he was thinking of his friends, not the rest of us.
The nerve of the bosses
The bosses were happy. Simon Walker, director-general of the Institute of Directors said, “We applaud this Budget.
“The chancellor has stuck to his guns and held his nerve—which is exactly what we wanted to see.”
Mortgages built to crash
George Osborne launched a slightly vague “Help to Buy” scheme with £130 billion to be made available in loans over three years.
The scheme is an echo of Margaret Thatcher’s Right to Buy.
It could be used by the wealthy to buy second homes or to create even more unaffordable buy-to-let properties.
The Bank of England will guarantee loans for people putting down 5 percent deposits to buy homes up to £600,000.
But economists are concerned that the scheme could simply inflate house prices even further.
Property developers and banks welcomed the proposals as their shares rose on the prospect of them cashing in.
Osborne gave an extra £800 million to a loan scheme that supports private rented sector developments.
Former Bank of England economist Erik Britton said ministers were in danger of repeating the mistakes which led to the financial crash of 2008.
He said, “What I fear will happen is that house prices will go up from an already overvalued position and households will take on even more debt from a position where they are vastly over?extended already.”