A mere six hours from his Twitter debut, Britain’s chancellor, George Osborne, had 27,800 followers. Before he could so much as tweet twice, he was greeted with more than a few angry obscenities including delights such as “@George_Osborne go stick your cock in a tiger.” And that’s before he even started speaking. Needless to say, Britain’s 2013 Budget is a tender issue.
Here’s a run down of the most important points for young people in Britain. (I have ignored stuff which doesn’t really affect our jinxed generation. The full summary of Budget changes is here).
The Big Picture
Bugger. The economy is now expected to grow by 0.6 per cent in 2013 – half of what George said it would at the end of last year. The figures are worked out by the Office of Budget Responsibility, which is independent, so there’s no tinkering going on. The slash is mostly due to a disastrous European Union economy, which accounts for just under half of the UK’s foreign trade, but George is also taking some of the blame from big-shot economists.
Sadly, the British government expects to borrow more this year – £114bn up from the previous estimate of £108bn. But this is not due to reckless spending. Essentially if the economy grows less than projected, it usually means that businesses and individuals are making less money and therefore pay less tax, which means that to compensate the government has to borrow more. But…the reverse is also true: job creation and economic growth means more people paying tax, which means that the government needs to borrow less. In a nutshell, we can grow ourselves out of debt.
Apparently there will be 600,000 more jobs in the UK this year. But don’t hold your breath, these figures are often wrong (mostly because it’s so hard to guess).
The personal allowance will be raised to £10,000 in April 2014 (a year earlier than planned, but no big surprise). This is the amount you can earn free of tax. George claims it will let anyone earning £10k or above pocket an extra £700 a year. That won’t exactly pay for your dream holiday, but it should cover your caffeine supplies.
This Budget was really big on companies, slashing their tax rate (to 20 per cent next year, the “lowest business tax of any major economy in the world”) and also cutting the amount of National Insurance they pay on your behalf by £2,000. NI is paid by you and your employer to contribute to your state pension. It’s compulsory and automatic on income over £146 per week. Why is NI and business tax important to you? Low rates encourage new start-ups, nudge existing businesses to employ more people, and entice foreign companies to come to the UK. All of this increases the number of jobs available and helps the UK economy grow.
King of Your Own Castle
I covered the UK’s serious housing crisis in a previous post, where I quoted the prime minister as saying that the average Brit does not buy their first house (even with a mortgage) until age 33. Why? It’s so damned expensive because there aren’t enough houses to go around. This Budget (thanks George) extended the NewBuy scheme and called it “Let me Give you my MP’s Mansion.” Well, kind of… They actually called it “Help to Buy” (imaginative, huh?). All first time buyers will now get help from the government to pay for up to 20 per cent of the value of their house, but you still have to stump up 5 per cent yourself – £12,000 on the average home. This could have one of two effects: loads of first time buyers will get their mitts on new houses, pushing up the price even more because there still aren’t enough houses being built. Or it could be like its predecessor which was only used 1,500 in its first nine months…
Oh, also mortgage lenders offering loans under this scheme will get refunded if you can’t cough up, paving the way for a) reckless lending or b) easier-to-get mortgages. Tit for tat on that one, but hopefully the two incentives will be enough to see house-builders see £££. Only thing is….new houses aren’t actually very popular.
The Small Things in Life
Beer will be 1 penny cheaper. Well there’s a life-saver if I ever saw one. Once upon a time you could fly to France with Ryanair for that. Unfortunately, all other alcohol is going up 3 pence.
Fuel will not be raised by 3 pennies in September as previously planned. This is interesting, actually. How much of the price of your average tank of fuel do you think goes to the government?
ANSWER: A whopping 59 per cent, or 57.95p per litre. This is what they call an ‘indirect tax’. No wonder people are driving less.
They’re cute, when not pooping or crying. They’re also going to be a bit cheaper, although last time I checked Tesco was out of stock. Parents will now be able to claim a 20 per cent discount on childcare costs up to £6,000 per child. Most parents spend about £4,000 per year on before- and after-school childcare during term time, but costs are soaring and a full-time place at nursery for a child under two costs around £11,000 per year. That’s almost half of the average wage in the UK.
Bottom line: big yay for companies, more like a ‘meh’ for everyone else. Fingers crossed it stimulates growth.
PS: Bank-bashers among you will want to know that Barclays gave its top nine bankers £38.5m in bonuses and announced it today under cover of the budget. Also, the Evening Standard put its beak in it when it tweeted the Budget key points 20 minutes early, breaking an embargo. Oops.