Budget 2012 - What Should George Osborne Do?

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On Wednesday lunchtime the Chancellor George Osborne will deliver his annual Budget statement to the Commons. The 2012 Budget comes as the UK economy stands at a crossroads between a possible rebound from the financial crisis - or conversely facing the prospect a double-dip recession.

HuffPost has gathered together those who will be affected by Osborne's decisions, to gauge opinion on what the Chancellor should be doing to improve the lives of millions of Britons.

Margaret Jennion, Financial Consultant, City Consulting

Along with most of Western Europe, I have nervously watched the long drawn out discussions between Greece and the European Union over the Greek debt problem. Now that they seem to have reached some sort of solution, I feel desperately sorry for the Greek people as they face years of misery. When I think about the UK economy, I worry that we are facing a similar, miserable future, with young people either unemployed or, if in work, unable to avoid the things we took for granted – a nice place to live, a reasonable car and pleasant holidays.

So I would like to see the Chancellor do the following things in the budget:

First, do something bold to convince us that the government is in charge and knows where it is going, giving us the confidence to take a few risks – we’ve had too much tinkering;

Second give some incentive to the entrepreneurial and the business generators to encourage them to employ a few more people. Whether its to cut employer’s national insurance for newly employed young people or to reduce the rate of VAT (even if only temporarily),

Third – really take some action on reducing red tape and bureaucracy – he could even employ a few more people to do this.

Finally anything they can think of to kick start growth by increasing consumption and to give some relief to the those struggling to hold families together by raising thresholds to take more out of tax.

What he should not do is remove the 50p tax rate on higher earners (although he could perhaps change the threshold). By all means promise this for the future but it should not be a priority this year – nor should increasing the taxes on alcohol to make it too expensive for those on low and moderate income.

See the rest of our panel:

Fiona Cuthbertson, Managing Director, Keystone Consulting

This budget has to be about new businesses and private sector jobs. Because of redundancies, public sector cuts and many private sector firms imposing a recruitment freeze, more people are starting their own businesses. I’m looking for some really strong measures to help entrepreneurs.

When I started Keystone Consulting I had support from my husband and savings to fall back on – a good thing as currently there is very little help during that key initial stage. With this in mind, it strikes me as important that the Government encourages business development by not immediately stopping all help when someone sets up on their own. It would have been useful to have some sort of benefit to help me through the initial stages – like the old Enterprise Allowance Scheme.

It would also be nice to see some help for people who are already running their small businesses. I’d like to see an extension to the VAT Flat Rate Scheme for small businesses beyond the current £150,000 turnover limit.

The Government is concentrating on reducing the cost of borrowing, which is important, but this does assume the businesses are started in the first place. More help is needed earlier to ensure people have the courage to develop their business ideas.

Having eaten into savings to start the business, we’re rebuilding them now. I would like to see help for savers, as they should not be punished for having been prudent even when times were good. With this in mind, an increase in the ISA allowance would mean more savings and more investment.

Like everyone, I’d like to see the Personal Income Tax Allowance lifted to £10,000 as quickly as possible.

I am currently expecting my first child. Women are most likely to ‘fill the gap’ left by state services by caring for children. It is important they are given some support in their endeavours. In addition, women with partners who fall into the high income tax bracket, but don’t work will ‘pay’ twice by losing their child benefit because it is currently used as a method of establishing pension entitlements. Without the child benefit, 1.8 million mothers will have their pension entitlements reduced.

In my mind, it’s all about fairness. Checks and balances. After all, it’s a lack of balance that means we have to make such hard decisions in the first place.

See the rest of our panel:

  • Fiona Cuthbertson, Keystone Consulting
  • Geraldine Bedell, Editor, Gransnet
  • Mark Daniels, Pub Landlord
  • Ros Altmann, Chief Executive, SAGA
  • Mark Corcoran-Lettice, unemployed graduate
  • On Wednesday lunchtime the Chancellor George Osborne will deliver his annual Budget statement to the Commons. The 2012 Budget comes as the UK economy stands at a crossroads between a possible rebound from the financial crisis - or conversely facing the prospect a double-dip recession.

    HuffPost has gathered together those who will be affected by Osborne's decisions, to gauge opinion on what the Chancellor should be doing to improve the lives of millions of Britons.

    Tony Dolphin, Chief Economist, Institute for Public Policy Research

    In the run-up to the Budget on Wednesday, Conservative backbenchers have called for deregulation of the labour market to support businesses and boost growth. They argue that it is too hard to hire and fire workers in the UK, and that this makes companies reluctant to recruit.

    There is, though, little evidence to support their claim. Businesses became increasingly reluctant to take on extra workers during 2011 not because labour market regulations were increased; they were not. They stopped hiring because the demand outlook deteriorated.

    In fact, according to the OECD, the UK has one of the least regulated labour markets among advanced economies. Its employment protection index, which measures the protection of permanent workers against individual dismissal; the specific requirements for collective dismissal; and regulations on temporary forms of employment, shows only the United States and Canada have less regulated labour markets.

    Hiring and firing is already relatively easy in the UK. Those arguing for greater deregulation of the labour market forget that workers are consumers too. The flip side of making it easier to fire workers is to reduce job security. And lower job security will make workers more cautious in their role as consumers, so taking demand out of the economy at a time when it is already weak. Cutting labour market regulation could therefore lead to slower growth in the short-term.

    The problem facing the UK economy is weak demand because the government is cutting its spending, businesses are cautious and hoarding cash and households’ are being squeezed. Businesses are not spending or recruiting because they do not believe there will be increased demand for their goods and services.

    The solution, therefore, is to boost demand through extra infrastructure spending and to support consumers to increase their demand through a temporary cut in National Insurance rates. This is far more likely to raise confidence and lead to more business spending than a cut in corporation tax or labour market deregulation.

    See the rest of our panel:

    • Fiona Cuthbertson, Keystone Consulting
    • Geraldine Bedell, Editor, Gransnet
    • Mark Daniels, Pub Landlord
    • Ros Altmann, Chief Executive, SAGA
    • Mark Corcoran-Lettice, unemployed graduate
    • On Wednesday lunchtime the Chancellor George Osborne will deliver his annual Budget statement to the Commons. The 2012 Budget comes as the UK economy stands at a crossroads between a possible rebound from the financial crisis - or conversely facing the prospect a double-dip recession.

      HuffPost has gathered together those who will be affected by Osborne's decisions, to gauge opinion on what the Chancellor should be doing to improve the lives of millions of Britons.

      Ros Altmann, Chief Executive, SAGA

      There are a number of issues that the Chancellor should address in this Budget.

      He should take the plunge and support small and medium business (SME) lending directly, because the lack of SME lending is really damaging growth. Large firms are flush with cash, but small companies are being starved of credit by over-cautious banks, imposing draconian conditions or denying loans.

      He should also unveil plans for a pension fund infrastructure investment programme, where pension investors (including public sector schemes) finance large projects, but with Government guarantees on future returns to mitigate risk.

      George Osborne should encourage the Bank of England to abandon its disastrous Quantitative Easing (QE) gilt-buying programme - which is hardly boosting growth, but is dangerously distorting the supposed-to-be-risk-free bond market, undermining pensions and boosting inflation. Any new money would be far better spent on underwriting SME lending or infrastructure investment, to directly stimulate the economy. This would create far more jobs than buying gilts or spending more money on unemployment benefits.

      I don't think abolishing the 50p tax rate is a top priority for this Budget, but I would expect that, if the rate stays, the Chancellor will not allow people to claim full 50 per cent relief on their pension contributions. He could either restrict this top relief, or reduce the annual pension contribution allowance. However, I hope he does not interfere more with pensions, since confidence in pension saving has plunged and, as we start automatically enrolling every worker into company pensions this year, we hardly need more negative pension headlines.

      Talking of pensions, QE has been a disaster for retirement incomes. Indeed, the Government needs to acknowledge the pain its policies have caused to the decent middle classes. Many recently or soon-to-be retired people have suffered a huge blow as annuity rates have been artificially forced down by QE. Those who have saved, avoided large debts - and the over 50s in particular - have also suffered significantly from low interest rates, high inflation and council spending cuts. Two things could help here.

      Firstly, the Chancellor should relax ISA investment restrictions, to allow people to invest their full £10,680 annual allowance in either cash or shares, rather than only permitting half in cash. This would allow older savers, trying to live off the income from their lifetime savings, to at least receive more of their meagre interest tax-free. Secondly, he could introduce an additional ISA allowance to encourage people to save for later life care needs. Nobody is saving for future care, there's no money put aside at all, because there have never been any official incentives to do so. Pension saving may not be sufficient, but the incentives have at least ensured billions of pounds in people's pensions. Taxbreaks such as a 'Care ISA' allowance, where savings would be tax-free only if spent on care (either for oneself or someone else) would encourage long-overdue preparation for advanced old age.

      The economy must be growing well by 2014/15 to meet the political timetable, so this year's Budget is for hunkering down and sowing the seeds of future success.

      See the rest of our panel:

      On Wednesday lunchtime the Chancellor George Osborne will deliver his annual Budget statement to the Commons. The 2012 Budget comes as the UK economy stands at a crossroads between a possible rebound from the financial crisis - or conversely facing the prospect a double-dip recession.

      HuffPost has gathered together those who will be affected by Osborne's decisions, to gauge opinion on what the Chancellor should be doing to improve the lives of millions of Britons.

      Mark Daniels, landlord of The Tharp Arms in Chippenham, Cambridgeshire

      The plight of Britain’s beleaguered pub trade is well documented. Not so long ago you couldn’t read a newspaper without also reading that 52 pubs were closing each week as the industry buckled in the wake of red tape such as the smoking ban and consumers tightened their belts following the collapse of the financial markets; despite this, the trade continues to be hit with tax hike after tax hike, forcing up the price of alcohol for our customers and driving trade away.

      Beer Duty, for example, has risen 35% since 2008 and today roughly a third of the price you pay for a
      pint is tax, and it’s only set to increase. In 2008 Alistair Darling reduced VAT to 15% to help ease consumers’ pockets a little but simultaneously increased duty on beer by 8%, negating any relief our customers might have felt.

      Customers didn’t recognise this at first, however, and to many it simply looked like we were pocketing the difference rather than passing on the savings – if only! And, thirteen months later when the rate returned to 17.5%, the duty increase wasn’t rescinded.

      So, when I look at what George Osbourne could do for us in his budget on Wednesday, relief from further increases in tax is a priority.

      I’d also like to see further responsibility placed on the off-trade, too. Supermarket booze should be cheaper than pubs – you are, effectively, paying for two different types of product – but their part in “Britain’s Binge Drink Culture” shouldn’t be forgotten, and often it is the publicans who are providing a safe and responsible place to drink while supermarkets can forget their responsibility the minute customers have left the premises.

      A lower rate of tax on keg and cask products (real ales, lager, cider etc.) that are served from pumps in pubs, compared to tax on packaged or bottled products, would help achieve this.

      I’m not a huge fan of VAT cuts as short-term fixes, but a VAT holiday or reduction for the hospitality industry is desperately being called for at the moment, with demand for pubs, bars, restaurants and hotels to carry just 5% VAT in order to attract more custom high on the industry’s agenda.

      But, for me, the biggest and most simple thing the Chancellor could do for us on Wednesday would be to remove the Alcohol Duty Escalator and freeze duty at its current level.

      This is a beautifully sly piece of legislation introduced by the previous government that allows Mr Osborne to announce there will be “no change” to the current policies on alcohol duty, which means an automatic increase in duty by 2% above the current RPI. Today, that would mean yet another hike of seven percent.

      With the cost of transport, utilities food etc. rising, abolishing this legislation and freezing duty would greatly help one of Britain’s most loyal and loved industries: pubs!

      See the rest of our panel:

      On Wednesday lunchtime the Chancellor George Osborne will deliver his annual Budget statement to the Commons. The 2012 Budget comes as the UK economy stands at a crossroads between a possible rebound from the financial crisis - or conversely facing the prospect a double-dip recession.

      HuffPost has gathered together those who will be affected by Osborne's decisions, to gauge opinion on what the Chancellor should be doing to improve the lives of millions of Britons.

      Geraldine Bedell, Editor, Gransnet

      Quantitative easing has been disastrous for older people. Many are having to buy pension annuities at much lower rates than a couple of years ago, ensuring diminished incomes for the rest of their lives. Inflation is eroding the value of
      savings, hurting millions of middle-income people who have saved for decades.

      We would like to see an end to QE – which is not encouraging banks to lend – and an industrial bank to lend to small and medium-sized companies and underwrite infrastructure projects. QE is a stealth tax on pensioners.

      Gransnetters come from all sides of the political spectrum, but there is general resistance to abolishing the 50p rate of income tax. Quite apart from the distasteful political message it sends out (we’re all in this together? yeah, right)
      there is a sense that it would be far better to give the money to the poor who have no alternative but to feed it back into the economy. This would include the poorest pensioners and creating jobs for the 22% of young people who are
      unemployed.

      Among our members’ most pressing concerns is how to pay for care, either for their parents or themselves. With the government’s response to Dilnot and a White Paper still to come, it seems unlikely that the Chancellor will say anything
      about this tomorrow – though a commitment to make care good and affordable would be the single most welcome move he could make. Ring-fencing the money that has gone to local authorities for care would be a good start.

      Many older people are cash-poor and asset-rich. A mansion tax, already dubbed the widow’s tax, could force older people to sell homes in which they’ve lived their whole lives. That said, there is a strong appetite for seeing the super-rich taxed. It seems all wrong that the very rich are the best at avoiding tax.

      Raising the tax-free threshold to £10,000, also heavily trailed, is not itself bad but does nothing for the bottom one-third who earn too little to pay tax, many of whom are pensioners. It would be fairer – and better for the economy – to cut VAT.

      Overall, gransnetters want a budget for families in the widest sense. We would like to see tax relief for both childcare and care of the elderly. One response to recession has been to try to set generations against each other, yet grandparents often have children and grandchildren who are badly affected by austerity.

      The myth of the I’m-alright-old is wrong: prices are rising alarmingly for many on fixed incomes. A good budget would be one that acknowledges the interdependence of generations.

      See the rest of our panel:

      On Wednesday lunchtime the Chancellor George Osborne will deliver his annual Budget statement to the Commons. The 2012 Budget comes as the UK economy stands at a crossroads between a possible rebound from the financial crisis - or conversely facing the prospect a double-dip recession.

      HuffPost has gathered together those who will be affected by Osborne's decisions, to gauge opinion on what the Chancellor should be doing to improve the lives of millions of Britons.

      Mark Corcoran-Lettice, a recent graduate of Newcastle University currently living in West Yorkshire.

      Wednesday’s Budget might just be another annual tradition in the procession of British politics, but there’s a trepidation and concern over this week’s announcement that’s rarely there. As a recent graduate trying to get onto the career ladder, I’m acutely aware of the on-going economic crisis and its impact on the job market – and increasingly concerned that George Osborne is doing nothing constructive to help.

      What would I like to see? Some firm measures that would help families struggling with their budgets and perhaps show that the coalition is listening to the concerns of the people being hit hardest. Cutting VAT back down to 17.5% would be a major signal that Britain is getting back on track, and a much needed sign that the coalition is not just doing the bidding of the banks.

      Unsurprisingly, I’d also like to see some form of benefits to encourage businesses to take on graduates and other young people, although I’m certainly not going to be holding my breath for it. What I suspect though is that we’ll be seeing largely the opposite: the abolition of the 50p tax rate that only benefits the wealthy, the standard issue price hikes on fuel and alcohol, and for any mansion or ‘tycoon’ tax (as being pushed for by the Liberal Democrats) to be of minimal effect at best.

      The near-certainty of a lowering of corporation tax, while perhaps a well-intentioned measure to encourage employers, isn’t something that fills me with confidence either – it might help convince large multi-nationals to shift more staff and premises over here, but it far from guarantees any major new recruitment in Britain. It may be just another Budget in the overall political picture, but it looks set to just reinforce economic doom and gloom rather than doing anything to lift it.

      See the rest of our panel:

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