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The Friday Five: why the young are the Budget's real victims

The 'granny tax' may have grabbed the headlines this week, but young people and families are the real casualties of Osborne's 2012 Budget.

 

by Victoria Bischoff on Mar 23, 2012 at 10:44

The proportion of taxpayers paying the higher rate of tax, meanwhile, will reach 15% next year, having been just 5% in the late-1980s, said Paul Johnson, director of the IFS. ‘It would be useful to know if the chancellor has a view as to what proportion of taxpayers should be paying at the higher rate.’

4. No stamp duty relief for first-time buyers

Aspiring property buyers were also left high and dry on Wednesday.

Land Registry figures put the average UK house price at more than £160,000 – over £350,000 if you’re trying to buy in London. Given that the average salary for full-time employees is a little over £26,000, that’s a pretty hefty price to pay.

What’s more, with most lenders still asking for a 20% deposit, buyers have to pay £32,000 of this up front – as well as forking out for some seriously expensive admin fees.

News that the stamp duty holiday for first-time buyers will not be extended beyond the 24 March deadline, therefore, will come as a serious blow. It means first-time buyers purchasing a property worth up to £250,000 will also need to stump up 1% of the transaction in stamp duty – another £1,600.

So while the government’s NewBuy scheme, aimed at helping 100,000 first-time buyers get an affordable mortgage on a new-build property, is something at least, it nowhere near makes up for cancelling their stamp-duty benefit.

And it’s not as if renting is a cheap alternative…

5. Revised child benefit cuts will still sting

Finally, while Osborne did climb down somewhat and revise his original child benefit cuts, hundreds of thousands of families are still set to suffer.

Originally, Osborne planned to whip child benefit away from any household with a higher-rate taxpayer – someone earning over £42,475. Critics, however, claimed this was unfair on households with just one earner who was a higher-rate taxpayer, as they would lose their child benefit, while a family with two earners just under the higher rate limit would keep it.

To pacify the critics Osborne has now said that only households with someone earning over £60,000 will lose the benefit completely. And to prevent a ‘cliff-edge effect’, which was another primary concern, families with an annual income of between £50,000 and £60,000 will see a gradual reduction in their child benefit – a 1% reduction for every £100 earned over the £50,000 threshold.

However, those who were concerned that the child benefit entitlement will depend on the income of the highest earner in the family will still be worried as this is still the case. And given that the higher rate threshold is going to be reduced next year, more people are going to be affected. 

Osborne said that the revisions mean that 90% of all families will remain eligible for child benefit. Of the 1.6 million families losing child benefit under the original plan, however, the IFS estimates that 700,000 people will still lose all of their benefit. Some 400,000 will only lose some, while 500,000 will retain it all.

For a full overview of Osborne's 2012 Budget check out our winners and losers picture gallery

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4 comments so far. Why not have your say?

Michael Stevens

Mar 23, 2012 at 20:54

About 75% of motorists are not worried about the price of fuel. Why?

They do not drive econically .Such as high speed, rapid acceleration,running engines while stationary and no idear how to save fuel. Large cars 4x4 etc.

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acropole

Mar 23, 2012 at 22:18

Michael S - You're absolutely right about acceleration and I would add - even more importantly - braking. The effect of speed seems to have sunk home better, as I note that more drivers are now choosing to travel at 50 or 60 mph on motorways.

Perhaps a fuel monitor gauge should be made compulsory on all new cars as it's the best illustrator. On one particular run I regularly make, I can affect the consumption between 50 and 70 mpg according to the way I drive, which is how I determined that unnecessary braking is even more wasteful than fast acceleration - at least in my particular car.

Clearly, many people are not at all hard up. In addition to fuel consumption, which may be due to ignorance, it is even more strange that on average they buy roughly 50% more food than they consume. Since many people obviously don't do that, one assumes that to produce the high average, some must buy twice as much as the eat.

Of course, with all the bogof offers, perhaps they would argue that it isn't costing them much!

What is clear is that the pensioner who can only eat one of a bogof pair is paying to subsidise the free one.

We do live in a very mad world.....

....and don't let me start on the fashion of having every room in a house permanently lit and heated.

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Anonymous 1 needed this 'off the record'

Mar 26, 2012 at 13:44

Ah, but those same drivers save a bit of fuel by reducing the electrical load on the car through not bothering to use indicators.

Or are they just selfish, dangerous & lazy t*rds?

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Blobby

Mar 26, 2012 at 13:47

So the unrealistic, all time low interest rates aren't helping first time buyers then?

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