The pre-budget report, how will it affect you?
November 25, 2008
Yesterday Chancellor Alistair Darling released a pre-budget report, with some quite drastic changes being put in place now and being planned for the future, in the hope that the country can be saved from a long lasting recession.
One of the key changes is a drop in VAT from 17.5% to 15% for the next 13 months, in the hope that this will encourage consumer spending and in turn give the waning economy a boost. However Conservative Shadow Chancellor George Osborne said that this move means the country is dropping deeper into its already high debt, and the change actually translates as “temporary tax giveaways paid for by a lifetime of tax rises on the British people” because we will be repaying the debts created by this change for many years to come. In addition, many small business owners have complained that the drop in VAT simply gives an administrative problem to businesses when adjusting pricing on all their goods. As one comment on the BBC website says:
“retailers like myself are faced with the daunting task of changing every single price on their system and reprinting shelf-edge labels. I wonder how many will actually bother passing on the meagre reductions to the public? Cheers Darling!”
Other changes planned are an increase in National Insurance for everyone by 0.5% and an increase in income tax for people earning over £150,000 to a whopping 45%. These changes are to take place in 2011. The Government has said that the only people who will lose out on this will be those earning £40,000 and above, but the Conservatives say that the National Insurance increase means that it will actually be people earning £20,000 and above that will be affected.
The pre-budget report has been heavily criticised by many people, mainly because it will increase borrowing to a record £118billion which will take many years to repay. It’s a big gamble for the Government to take which, if it goes wrong, could lead to even more problems in the future with bad debt, more property repossessions and large scale redundancies. It’s a depressing thought that I hope does not turn into a reality.
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