Sam Corcorans Budget Commentary

The first thing that struck me about the Budget was how little substance it
contained. This was the first Spring Budget of a new Chancellor, so I would
have expected new ideas, but the only headline grabbing change was the
increase in National Insurance for the self-employed.
The second thing that struck me was the disparity between the rhetoric and
the actual tax changes. The Chancellor said that he wanted to address the
discrepancy between the rates of tax paid by employees and workers operating
through limited companies. An employee earning (say) £30,000 a year will pay
tax at 20% plus employee’s National Insurance at 12% and the company will
pay employer’s NI at 13.8%. A worker operating through a limited company
earning £30,000 a year will pay corporation tax at 20% and dividend tax at
7.5%. The first £5,000 of dividends are tax free and the Chancellor
announced that this will be reduced to £2,000 tax free from April 2018; this
will cost the worker in my example operating through a limited company £225
a year in extra tax. The Chancellor also confirmed a cut in corporation tax
to 17% by 2020. This will give the worker in my example operating through a
limited company up to £900 a year in reduced corporation tax. So actually
the discrepancy between the rates of tax paid by employees and workers
operating through limited companies will INCREASE over the next few years.
The Chancellor also said that we shouldn’t be saddling our children with
ever increasing debt, but then announced that government borrowing will be
£100bn higher than predicted at Budget 2016. Government debt now stands at
£1.7trn (nearly double what it was in 2010). The Chancellor criticised
Labour’s plans to borrow £500bn to spend on capital infrastructure projects,
but seems happy to borrow to fund corporation tax cuts!
UK economic growth is forecast to be 2% in 2017 (roughly the same as it was
when Labour left office in May 2010). Growth is forecast to fall to 1.6% in
2018.
The Chancellor announced £100m to put GPs into A&E departments, but he
didn’t explain where the GPs would come from. If the plan is to move GPs out
of GP surgeries then this is going to make it even harder to get a GP
appointment! The underlying problem is a shortage of GPs and the diversion
of GPs away from the core job of seeing patients in GP surgeries.
I was surprised to hear the Chancellor say that ‘Choice is the key to
excellence in education’. I disagree! I think that good teachers and decent
funding is the key to excellence in education. The Chancellor announced an
extension to free transport for those at selective schools. This will jar
with many parents in Cheshire East who have just had their free school
transport withdrawn and are facing major funding cuts to their local school.
Finally the Chancellor said that those with the broadest shoulders should
bear the heaviest burden. A fine sentiment, but it is not matched by the
announcements in the Budget. The corporation tax rate will be cut to 17% by
2020. The Universal Credit taper rate will be reduced from 65% to 63%! Who
has the broadest shoulders? Is it a multi-national company or a low paid
worker who earns just enough to have some of their benefits withdrawn?

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