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 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.
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.
Because the tax-free allowance is going up to £11,000 you’d end up around £80 better off. Yipee!
So, lets look at the claim from the Guardian that due to changes to tax credits some people could be £1,000 worse off. Tax 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.
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!
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.
An older married couple with a combined income of £85,000 would actually be £221 better off. Say what?
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.
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.
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.
LRT – i would never have gone to uni, nor be graduating with a first class honours next week if #maintenancegrants were scrapped
— Holly Gallagher (@hollyrachael_) July 8, 2015
At the moment around half a million students in England receive grants. However some people aren’t too bothered;
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.
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?!
There is no arguing that budgeting is important, but doing so is not always so easy. Though it gets a little more complicated when you’re managing funds for the whole country.
The Budget (it’s important so it gets a capital B) is a breakdown of where the money from Her Majesty’s Treasury is spent.
Money is collected through tax by Her Majesty’s Revenues and Customs and is spent on public services – such as roads, hospitals, education.
The Budget is usually released in March – just before the start of a new financial year, which starts in April (we’ll leave that one for another time).
At 12.30PM today, Osborne will announce the new budget to Parliament, outlining the state of the British economy and the changes the new Conservative government will be making. It will be a chance to see if he sticks with his earlier promises made before the election.
If you’re a big politics fan you can watch on BBC Parliament (a whole TV channel devoted to British politics .. who knew?!) from 12PM.
This is an emergency budget. The Tories weren’t expected to win a majority so the previous budget was a compromise with what they wanted to do, and what they thought they’d be allowed to do with their pals in coalition.
Now we have a Conservative majority George Osborne can pretty much do what he wants.
Watch out for phrases like Long Term Economic Plan (we have a plan) and Stable Growth (Progress slower than expected).
Read our breakdown of the previous budget: The Budget: Decoded