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The shift in tax boundaries contained in the budget will do little to fuel job creation in the economy, according to the CIPD’s chief economist John Philpott.In his keynote annual speech, the Chancellor revealed that the personal tax allowance, the amount at which a working person starts paying tax, will go up to £8,105 this April and then to £9205 in 2013/4. Meanwhile, the top rate of income tax will drop from 50p to 45p from April 2013. Osborne said that the Office for Budget Responsibility (OBR) forecast has hardly changed from last November as the UK was “not immune” from the impacts of Europe’s economic slowdown and the potential for a damaging spike in oil prices. However, he said the OBR “expects the British economy to avoid a technical recession with positive growth in the first quarter of this year”.UK growth has been revised “slightly up” for 2012 to 0.8 per cent, with 2 per cent growth next year, while inflation is expected to continue to fall from 2.8 per cent this year to 1.9 per cent next year. Unemployment is still expected to peak at 8.7 per cent this year before falling to 6.3 per cent in 2016, as predicted last autumn, and the OBR forecast that there will be one million more jobs in the economy over the next five years .Responding to the budget speech, Philpott said that the headline tax changes would not make a significant difference to the bigger picture on growth and jobs. “The personal tax allowance rise was better than a kick in the teeth and it adds a degree of fairness to the budget to offset what’s happening on the 50p tax rate,” said Philpott. “But there wasn’t anything on taxation to generate hiring or anything of that kind.“Once the fine print has been scoured, if it does prove to be a ‘Robin Hood’ budget, it’s surely ‘Robin Hood Lite’ with less for those not in work and the promise of an extra £10 billion of welfare cuts to come.”The Chancellor also announced that the OBR “have revised down their estimate of the claimant count, which they now expect to be around 100,000 lower in each of the next four years than they previously forecast – peaking at 1.67 million this year rather than the 1.8 million they forecast in November”.However, Philpott said: “The OBR’s forecast for employment growth and headline unemployment is unchanged, with a lower forecast for claimant unemployment due in large part to a methodological change to the forecast rather than anything to do with the effects of policy.“Most worryingly of all, the OBR has significantly downgraded its forecast for growth in business investment between now and 2016 while raising its forecast for growth in household consumption and government spending and investment. If the OBR is proved right, the economy doesn’t appear to be rebalancing in the way we were supposed to expect, which casts an element of doubt on the Chancellor’s claim that the budget will enable Britain to ‘earn its way’ to recovery.”The Chancellor reiterated his intention to move towards regionalised pay for the public sector, as he told Parliament that the Treasury had just published the evidence it is submitting to the independent pay review bodies tasked with examining the issue.He also confirmed that Sunday trading laws would be relaxed for the duration of the London Olympic Games and that there will be an automatic review of the state pension age to ensure it keeps pace with increases in life span.
If we believed what the Chancellor had told us in his previous budgets we would be in a much better position by now. Taking money from the poorest in society who put everything they get back into the economy whilst giving money to the richest who do not will hinder recovery. Also making even more public sector workers redundant when it is clear the private sector cannot mop up anywhere near the amount of jobs the Chancellor said it would will also make the economy worse and cause a drop in business confidence and therefore investment. Most economists know this to be true and I can only support Mr Philpott's educated view over a politician who is carrying out what will be a failed experiment.
Jeremy, do I note the tone of a conservative in your post? I have read the budget, listened to all sides of the arguement and all I can really say is that it was a "kick in the teeth" to ordinary working people, with nothing at all in itfor small employers which Mr Osbourne continually says he wishes to help.
Does Mr Philpott ever look at anything other than in the negative? <br/>"Better than a kick in the teeth" hardly projects a positive slant and then he promptly drags up "less for those not in work and the promise of an extra £10 billion of welfare cuts to come" (which might just conceivably be necessary for rebalancing purposes because of the unsustainable increase in the generosity of welfare benefits in the past). <br/>He blames the method of counting for what appears to be marginally good news rather than actually accepting it as marginally good news. The rest of the response labours (pardon the pun) on unemployment, downgrading forecasts and questioning the Chancellor's previous and current claims, despite the fact that the Chancellor may just have access to at least as good if not better information than Mr Philpott's.