With the challenges facing the British economy and the huge pressure on many families' finances, George Osborne didn't have much room for manoeuvre in today's Budget. There was no spare cash for giveaways so he made a series of careful trade-offs which, overall, will leave ease the pressure on lots of households and allow most of them to keep more of their own money.
First there was some cheer for families who have struggled in the recession. The cuts in corporate and top rate taxes will improve the incentive to invest and innovate, meaning higher wages before tax. This is a good measure to encourage much needed growth in the economy. The highest biggest ever increase in the personal allowance, to £9,205 from next year, will mean they can keep more of the money they earn, improving their living standards.
Unfortunately someone has to pay for that change and it looks like millions of pensioners stand to lose out in a big way as they're going to get a lower personal allowance than they expected.
Age related allowances are a complicated feature of the tax system and removing them would represent a simplification, but this is probably the most controversial measure the Chancellor announced. That wasn't the only Budget nasty, there will also be 300,000 extra people who, without getting a pay rise, will pay the higher rate of Income Tax (40%), if you happen to earn £41,450 in in April 2013 then you will be one of them.
As usual smokers, drinkers and motorists took a beating. Osborne ignored pleas to abandon a planned hike in Fuel Duty and slapped another 37 pence on a packet of cigarettes. Tax on beer will increase by 2% above RPI inflation, so prices will rise by 5% from next week. Smokers and pub-goers can always quit if they don't want to pay, although experience suggests many smokers won't and will simply start buying their cigarettes on the black market.
There is even a growing trade in illicit alcohol, as well as fuel such as red diesel. Most drivers don't have the luxury of viewing Fuel Duty as optional; for those living outside a city a car and fuel travel in is essential to get children to school or to get to work. It's hugely unfair to hammer motorists who are already so heavily-taxed. Only Turkey pay a higher proportion of tax at the pump than we do.
This was a Budget that saw business and ordinary families both looked after with measures to encourage growth and enterprise. The Chancellor could have gone further with tax cuts, for example by scrapping the 50p rate altogether instead of stopping in a halfway house at 45p with no indication of how long this will last.
With so much hype and so many leaked announcements ahead of the day there was little to get excited about, but lots of families will certainly welcome the boost in their bank accounts that the Budget will bring them.
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