The Budget: A First Response

March 12th, 2008

Supposedly one of the most exciting days in the politico-economic calendar, today is budget day. While some people are saying that the budget this year was a boring and long winded way of saying and doing very little, others are saying that this is what the Chancellor intended. And yet there seem to be a whole host of consequences of this doing nothing, which I shall now examine.

Firstly, there will be an increase in the overall tax burden over the next three years. In his first Budget the Chancellor put 4p on a pint of beer, 14p on a bottle of wine and 55p on a bottle of spirits. Duty on a packet of cigarettes is up 11p. There were no significant changes on income tax or VAT.

Plans to increase first-year road tax by £950 for the most polluting vehicles and a general reform of Vehicle Excise Duty aimed at encouraging the production of greener cars are also expected to bring in an extra £730m annually by 2010. Mr Darling also said he was setting aside new funding to develop road-pricing schemes. Risking the anger of environmental groups the Chancellor delaying a planned increase in fuel duty for six months but motorists will face an April 2009 fuel duty rise of 1.84p a litr

The over-60s will now get £250 winter fuel payment instead of £200 and the over-80s will get £400 instead of £300. Similarly, child benefit will rise from April 2009 to £20 week – a year earlier than planned, and there was more help for families using pre-paid electricity meters.

Darling announced an increase in the amount airlines will have to pay to become “greener,” an extra 10% on plane duty in the second year of a new per-flight tax regime, replacing the unpopular Air Passenger Duty (APD) from November 2009.

Following on with the vote winning environmental theme, Mr Darling ordered stores to ban single-use carrier bags by next year or face legislation and announced a review of carbon targets with aim of reducing emissions by 80% by 2050, up from 60%.

In other changes, stamp duty on shared-ownership homes will not be required until buyers own 80% of the equity in their home.

The budget has had a mixed reception, the changes that benefit poor children have elicited praise from charities such as Barnardos but the environmental aspects have been criticised by airlines for being too strict and by environmental pressure groups for being too lenient.

The truth is that with the economy’s growth slowing at the current rate there was little the Chancellor could do but tinker, a fact which David Cameron was swift to pounce upon. He called the budget a ‘dire list of review and reannouncements.’ The general feeling will take longer to judge but looks like being summed up by Cameron’s subsequent statement. ‘The cost of living is going up and Labour is making it worse.’

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The Budget: A First Response

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