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Thursday, March 04, 2021

Tory budget will hit the poorest hardest

Nobody is pretending that the Chancellor of the Exchequer did not have a difficult job yesterday, but the least we could have expected was some sign of the Brexit dividend Boris Johnson has been promising for the last five years. Alas it did not materialise because it has never existed.

The main concern arising from this budget, other than the pork barrel politics of pushing new spending towards Tory held constituencies, was the impact on the low paid and the unemployed. The Joseph Rowntree Foundation has warned that the chancellor risks plunging 500,000 people into poverty if the government presses ahead with cutting the £20-per-week universal credit increase in six months’ time.

Their estimates show the plans to end the uplift, which will coincide with the phasing out of the furlough scheme, will see half a million people, including 200,000 children, placed into poverty in the winter. The organisation added in its post-Budget analysis: “The OBR [Office for Budget Responsibility] latest forecasts show that unemployment is expected to increase by a further 500,000 people between now and the peak towards the end of the year.

The budget also saw the end of the Liberal Democrats-led policy, initiated as part the coalition agreement, of raising the personal tax allowance to take millions of low paid workers out of paying income tax. By freezing income tax personal allowance thresholds until 2026, the chancellor will drag 1.3 million low-paid people into paying it as their earnings increase.

As the Independent reports, the Institute for Fiscal Studies described yesterday's event as the biggest tax-raising budget since 1993, increasing the state’s net take by £29bn in 2025-26. The overall tax burden of 35 per cent of GDP will be the highest since Roy Jenkins was chancellor in the 1960s:

And IFS director Paul Johnson said it can be expected to remain high for years, warning: “We are in a new phase of UK economic history. Taxes likely to be at their highest sustained level in history.”

Meanwhile, the Office for Budget Responsibility (OBR) warned that Mr Sunak’s plans make no provision for pandemic spending after 2022.

Indeed, the Treasury’s figures suggest that rapidly falling Covid-19 expenditure will allow a £30bn drop in overall health and social care funding in 2021/22 – something which Labour warned would “increase pressure on staff and do nothing for patients stuck on growing waiting lists”.

So just another Tory budget then.
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