5 Things to know about the summer budget

Chancellor George Osborne stands outside No. 11 Downing Street

The Chancellor George Osborne is set to announce the first purely Conservative Budget since 1996 on Wednesday, and there is sure to be some serious discussion about what he has drawn up, mainly surrounding cuts, cuts and more cuts. Austerity Britain appears in full effect, and here are my 5 main things to look out for on the 8th July:


1. Benefits will be cut

Mr. Osborne is set to propose a vast range of cuts to welfare benefits, ranging from slashing child tax credits to reducing the benefits cap; Osborne is making a strong effort to disincentivise the attraction of living off of benefits, albeit seemingly at the cost of low-income working class families. 45% of working families are set to have their incomes significantly reduced as a result of the cuts to Osborne’s tax credit according to the Social Mobility and Child Poverty Commission, who also find that approximately 7 million children will be affected by the changes.

The benefits cap will be also be reduced; in London the total will fall from £26,000 per year to £23,000, whereas in the rest of the country the figure will be £20,000. Benefits cuts have always been a central part of the Conservative campaign and this budget will show no different.

Job Centre Plus

 

2. There will be sharp Departmental cuts

Because of the Conservatives commitment to protecting some departmental areas such as the educational system, the NHS and overseas aid, it’s estimated that around £30 billion will have to be sliced from other less protected areas. The £8 billion per year pledge the Tories have made to the NHS is going to have harsh effects on other areas.

For example, the remaining 30% of the Royal mail which is owned by the taxpayer will be sold off (at a profit of £1.5billion for the taxpayer), whilst – in a very un-Tory like move – £500 million will be cut from the defence budget, something which actually contradicts a NATO target of looking to spend 2% of GDP on defence.

Alongside this, the BBC is going to have to foot the £650 million per year that it costs to provide free television licenses for over 75s; an ageing population is something that is sure to drain on the BBC’s funding as years go by, but free TV licenses are something that Mr. Osborne clearly no longer sees as fundamental to the taxpayer.

BBC

 

3. Expect housing legislation changes

Two big changes to household legislation are set to be put in place by the Chancellor, one regarding local authority housing and one regarding the inheritance tax threshold. 340,000+ local authority housing tenants on incomes of £40,000 or more will be subject to market rent prices. This supposedly will raise £250 million per year by 2018/19, preventing (as noted by the Independent) the ‘Frank Dobsons of this world’ – the MP who in 2011 had been living in council house whilst earning £66,000 per year – from exploiting the local authority housing scheme for cheap living space.

Osborne also plans to raise the inheritance tax threshold on homes to £500,000 for an individual and £1 million for families/couples. Rachael Griffin notes that “with the IHT thresholds as they are, many more families could find themselves hit with large tax bills on receipt of an inherited property. If the Conservative plans to introduce an additional allowance for property are introduced, more of them will be able to pass down their family homes in full, without the need to sell or downsize.”

Inheritance tax

 

4. Tax loopholes will be clamped down

The chancellor is looking to make the effort to prevent the exploitative nature of Non-Doms, made famous by Ed Balls’ contradiction on their existence during the Labour election campaign. Non-Dom status allows for those who claim that their home is outside of the UK to only be taxed on what they earn within the UK, and not their worldwide income, allowing for, in many cases, large amounts of tax to be legally avoided.

Alongside this, Osborne will be changing the amounts that the wealthy can put into private pensions tax free every year. Anyone earning £150,000+ can put £40,000 tax free maximum into their pension that year. Those earning more than this will see the maximum tax free contribution level fall on a sliding scale to £10,000 for those earning £210,000 per year.

 

5. There will be small benefits for individual incomes

There will be an increase in how much can be earned before paying income tax. In 2015/16, the threshold was £10,600, and this will be raised to £11,000 in 2017/18. Further, the amount at which people start paying 40% income tax will climb from £42,385 to £43,300 in 2017/18. Finally, the national minimum wage will increase by 20p an hour to £6.70 from October.

Combining all of these factors appears to demonstrate that Osborne and the Conservative party are firmly behind austerity Britain, with cuts ringing around the summer budget. It seems that the Tories are making the most of their first majority since the mid 90s with fundamentally Conservative (and conservative) policies.

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