What The Budget 2015 Means For Young People

9th July 2015 By ,   0 Comments

First we had a budget in April; didn’t understand that. Now we’ve had a summer “emergency budget”? What’s that all about?

 

Hands up who was confused by the Budget 2015?

Changes to the Personal Allowance of Tax from Budget 2015

FYI; 81.6% of the UK fall into paying the basic rate of tax

George Osborne’s first budget of the new Conservative government was full of contradictions. On the one hand he is cutting £12 billion pounds from benefits (boo); one the other he’s creating a National Living Wage of £7.20 PH (YAY!)

The Emergency Budget 2015 Explained

The announced changes were met with cheers from the Tories, and outrage from the Opposition (Labour, Lib Dems, SNP, UKIP Plaid Cymru and the rest).

The Guardian has reported that the new “Living Wage” isn’t enough to make up for the cuts to welfare. People who claim tax credits could be £1,000 worse of a year according to the Institute of Fiscal Studies. Doesn’t sound great.

So how does the new budget 2015 affect you? The BBC has created a Budget Calculator. You can try it out for yourself on the BBC website; we thought we’d explore how the changes could affect different people.

 

Tax and Moneys

For Starters

Let’s say you’re 21/22. Perhaps you’ve just left university, maybe not.  You have a job on the minimum wage (currently £6.50 PH) working 40 hours or so a week. Your annual earnings would probably be around £13,000.

Calculation from the BBC showing if you are better or worse off from Budget 2015

£80 better off. Get in! Via BBC

Because the tax-free allowance is going up to £11,000 you’d end up around £80 better off. Yipee!

 

There’s more

So, lets look at the claim from the Guardian that due to changes to tax credits some people could be £1,000 worse offTax Credits are benefits (extra £££) given to people who look after children, to disabled workers and those on lower incomes.

In the new budget “working-age benefits, including tax credits and Local Housing Allowance, will be frozen for 4 years from 2016-17”

The calculator says a married couple with a combined income of £21,600 and two children could be worse off by £1,113. Hmm.

Calculation from the BBC showing if you are better or worse off from Budget 2015

Looks like the Guardian was right. Ouch. Via BBC

This was based on one partner earning £19,000 a year on full-time hours; the other working part-time and earning £2,600. Both at 25 (still young!) and the age you’ll become eligible for the new “Living Wage”.

Though they are £80 better off thanks to changes to income tax, on the whole they make a loss because they are getting less tax credits. In fact, the calculator suggests that in order to keep the same income they had before, the partner (who originally earned £2,600 a year) would have to earn an extra £10,978.56! Whether this is the case, we don’t know. But we sure hope not!

Calculation from the BBC showing if you are better or worse off from Budget 2015

Breaking even

Removing the two children from the equation means we’re back to £80 better off. Does this mean we shouldn’t have kids?!

Looks a bit like The Guardian 1, Osborne 0.

 

So are things better for older people?

An older married couple with a combined income of £85,000 would actually be £221 better off. Say what?

Calculation from the BBC showing if you are better or worse off from Budget 2015

Osborne’s changes are designed to help those on “middle incomes” Via BBC

This is again because of the changes to the tax thresholds where you pay the higher rate of tax.

Does this mean the budget will be better for the rich and worse for the poor? Although the media might say “YES”, it’s a lot more complicated than that. Like any example these calculations are very specific. Everyone has different circumstances so it’s probably impossible to come up with a basic rule which covers everyone.

It’s also worth saying (because the BBC did) that these figures are estimates only. They don’t include all the changes made; just the ones made to income and earnings.

People are still unhappy though. And if you’re under 25 you might be too. Whilst others get the fancy new “Living Wage” of £7.20 PH you’re going to be stuck on £6.50 PH. Minimum-bleugh.

 

What the calculator doesn’t include

The budget 2015 wasn’t just about tax and income; it covered a whole range of topics. The speech was even a few minutes longer than usual. Crazy times.

Forget University

One of the major policy brought in by the coalition government which affected young people was the raising of tuition fees. The new budget only raised them in line with inflation; but Student Maintenance Grants are being scrapped. These are non-repayable £££’s which are given to students from low-income backgrounds.

Instead of grants students will have to take out Student Maintenance Loans instead. Conservatives say “Don’t worry, you won’t have to pay them back until you’re earning £21K +”. As well as paying back tuition fees.

At the moment around half a million students in England receive grants. However some people aren’t too bothered;

https://twitter.com/JordanPlatten/status/619153109433118721

 

Where am I going to live?

So, you need somewhere to live. Don’t count on the government paying however. The Conservatives are stopping the automatic entitlement to housing benefit for 18-21 year olds.

Housing benefit is a regular £££’s to help pay your rent. It’s paid by your local council.  You can claim it if you’re on a low-income or claiming other state benefits.

 

Why the hate for the young?

So, not the best of times if you’re young and/or a student. George Osborne says he wants to make the tax and benefits system fairer.

“We have to move Britain from a low-wage, high-tax, high-welfare society to a higher-wage, lower-tax, lower-welfare economy.

For Britain is home to 1% of the world’s population; generates 4% of the world’s income; and yet pays out 7% of the world’s welfare spending. It is not fair to the taxpayers paying for it. It needs to change.

The best route out of poverty is work. It is not acceptable that in an economy moving towards full employment, some young people leave school and go straight on to a life on benefits.

– George Osborne’s Budget 2015 speech

 

It’s not just young people who are affected by the budget. But even so, the Guardian asks “What have young people done to deserve George Osborne’s contempt?”. We’d love to hear from Mr. Osborne himself. So if you’re reading, George – is it personal?!

 

Budget 2015 learnings; some good, some bad, some ugly.

Is Budget 2015 unfair to young people? Or should people stop moaning about benefits and go and get a job?

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