As George Osborne read out Britain’s 2012 budget to the House of Commons, both members of opposition parties and British working families spoke of their outrage at the decisions he had made. Although allowances were made in the form of an increase in tax-free earnings, George Osborne’s budget has increased tax levies on certain goods, as well as limiting the number of people who can receive child benefit. It is likely that his deficit reducing decisions are going to have a negative affect on working families, but how is that the case.
Under the latest budget, the tax-free allowance is set to rise to Â£9,205 from April 2013 onwards. This means that under the coalition government, those who work in minimum wage jobs will see their income tax halved. As far as families are concerned, this will clearly have some great benefits; the Telegraph claims that this will make over 24 million people Â£220 ($341) better off. Although this is a considerable increase in the amount of available earnings families have, it only masks over the other cuts many will have to face. Two hundred and twenty pounds will be insulting to those families who face hardship due to the cuts that are proposed in the 2012 budget.
One of the hardest hitting increases in George Osborne’s budget is the rise in fuel duty. Although this was planned prior to the budget being read out, as it is due to be implemented in August 2012 means millions of working families will face the challenge of rising fuel costs while staying employed. According to the BBC 2012 budget calculator, for the average working family this will mean that their fuel expenditure will rise by Â£149.00 ($230.00). When you look at those figures, it is easy to see why the Â£220.00 saving made thanks to the increase in tax-free allowance will fail to make life easier for parents who work.
In addition to fuel rises, many middle-income earners will lose out on their weekly child benefit. Prior to Osborne’s budget, every family in Britain would receive around Â£20.00 ($31.00) per week for their first child and an additional Â£13.00 ($20.00) for any subsequent children. As of April 2012, working families with at least one person earning Â£60,000 ($93,000) will lose their entire child benefit entitlement. On the face of things this may seem fair, as the child benefit reductions will only hit high earners. However, it is important to consider that those earners pay up to 40 percent income tax and will now receive nothing in return.
Although the 2012 budget has been designed to tackle Britain’s deficit in an age of austerity, the measures that have been taken appear to hit those who need the most support. In addition to the above changes, working families who have jobs in the public sector will see gradual wage decreases, while some OAPs will see their pensions re-taxed. As Britain’s new tax year is just around the corner, it remains to be seen just who will benefit from the changes implemented by the coalition government.