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Budget: Poor to get poorer, coalition admits

Chancellor says policies are for hard-working families. Picture: Getty

Chancellor says policies are for hard-working families. Picture: Getty

  • by DAVID MADDOX
 

BRITAIN’S poorest families will be up to £200 worse off a year while the better off will see their incomes rise, according to the UK government’s assessment of the impact of policies ­announced by George Osborne yesterday in his Autumn Statement.

The admission came in what the Chancellor described as his statement “for hard-working families” – where improved economic figures and growth meant he was able to look ­towards the 2015 election with giveaways to help boost business, tackle the cost of living and improve employment. Mr Osborne said his measures would deliver a “responsible recovery for all” and claimed “at the heart of our economic plan is support for the creation of more jobs”.

Among the measures he announced was the scrapping of a planned rise in fuel duty of 2p a litre, as well as extending the help-to-buy scheme for home buyers amid evidence the government hopes to cash in on a housing boom.

Married couples where one partner stays at home or only works part-time will be given a tax break worth up to £200 a year and fuel bills will be ­reduced by £50 for each household. There will also be an ­attempt to tackle pensioner poverty, especially among women, by allowing people to top up their national insurance contributions if they have spent time out of the labour market.

In an effort to tackle youth unemployment, Mr ­Osborne will offer to exempt companies from making national insurance contributions for employees under 21.

The Chancellor confirmed he is to attempt to keep public spending down by introducing a welfare cap. He also promised to claw back £9 billion in tax avoidance by the wealthy.

The UK government’s analysis report revealed in the next tax year, the bottom 10 per cent of households by income will be £200 worse off, compared with 2010-11.

It showed that while the richest 10 per cent will be hardest hit – losing on average £1,550 a year, about 2 per cent of their incomes – the bottom 40 per cent all lose about 1 per cent of their incomes mostly as a result of a continued squeeze on welfare. At the same time, other groups in the top half of household incomes will see their ­incomes rise.

Mr Osborne also announced in his speech plans for the pension age to “keep track with life expectancy” to save future taxpayers £500bn.

The date when the state pension age rises to 68 will be brought forward to the mid-2030s – it had not been due to kick in until 2046 – and the age could rise to 69 by the late 2040s.

The government admitted average wages up to 2018 will not keep pace with the cost of living.

Wages will go up 1.5 per cent this year and peak at a 3.8 rise in 2018. However inflation is set to be 3.1 per cent this year and 4 per cent in 2018.

Mark Serwotka, leader of the Public and Commercial Services union, said: “This is not an economic plan, it’s austerity for austerity’s sake, as the Tories – propped up by the Liberal Democrats – look to reshape our society for years to come and make the poor, sick and unemployed pay for the greed and recklessness of wealthy elites.”

The change in the state pension age also brought a warning that people will have to put more aside for their old age.

Nigel Green, founder and chief executive of the deVere Group, said the announcement was the “ultimate reality check” that funding retirements was now a personal responsibility.

Business groups welcomed the reduction in rates but said the coalition had failed to go far enough on fuel bills.

CBI director John Cridland said: “The cost of energy is affecting the competitiveness of our energy intensive firms which support jobs and growth, so it’s disappointing this wasn’t ­addressed.”

At a glance

• The state pension age raised to 68 in the mid-2030s and to 69 in the late 2040s. In April 2014, the state pension will rise by £2.95 a week.

• Overall welfare spending to be capped.

• Petrol taxes stay frozen – a planned rise of 2p per litre for next year is to be scrapped.

• Employer National Insurance contributions on 1.5m jobs for young people to be scrapped.

• From April 2015, capital gains tax for non-residents who sell residential property.

• The personal income tax allowance will rise to £10,000 from April 2014, and then increase by level of inflation.

• A married couple’s and civil partner’s tax break, starting in April 2015, enabling people to transfer £1,000 of their income tax allowance to their partners.

• Rate of bank levy will rise to 0.156 per cent. Estimated to raise £2.7bn in 2014-15.

• A new science centre in Edinburgh University to be named after Prof Peter Higgs.

• Tax allowances to encourage investment in shale gas.

• Cost of green levies cut from energy bills and paid through tax, saving average £50 per household bill.

• People unemployed for more than six months to be forced to start a traineeship, take work experience or do a community work placement or lose benefits.

Case study: ‘We have had large student debts to take on and now this’

Hazel Mollison, 33, would have been able to retire at 65 in 2045 under the previous plans. Now the government is due to introduce a retirement age of 68 from the 2030s, it means she will have to work for an extra three years – and possibly longer – to get the state pension.

Ms Mollison, from Edinburgh, a communications officer for a translation company, said the changes would mean she would have less time to spend with her family before reaching old age.

She added: “I feel our generation has had it hard – we have had large student debts to take on and now this.

“My parents’ generation were able to retire early and enjoy middle age.

“My mum took retirement at 60 and has had plenty of time to do other things that she has wanted to do. For me, 68 seems like such a long time away.

“If I had been able to retire earlier, I would have wanted to travel, spend time with my friends and family and do things like go to art galleries, which I won’t get time to do while I’m working.

“Now, I won’t be able to do those things for as long and 68 does seem quite old to have to be working. I would hope that I wouldn’t need to work full-time for as long as that. It seems harsh that we have to continue to work when we should be enjoying time with our families after spending our lives at work.

“I suppose the idea of retiring at 65 always seemed quite optimistic, as I haven’t even started to plan for my retirement. I don’t pay into a private pension plan, even though I know I should.”

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