So it’s time for THE BUDGET. I am certain that all of you are interested in it…and you should be. For the first time in decades we have two things; a coalition government from opposite sides of the political spectrum trying to work together and the need for budgeting our way out of the deficit. But who will the budget hit hardest? What effect will it have on students? And how bad will it be?
When the Liberal Democrats have less control, they will need reassurance that the poor won’t be hit hardest; George Osborne is adamant that it won’t. If you look at the increase of the income tax threshold and the national insurance threshold then he may well have a point; the changes will benefit those in poorly paid jobs.
However, Osborne claims that raising the income tax threshold will save people £175 each, but the Liberal Democrats’ 2010 election posters said that the VAT rise would cost each person £389 and more recent estimates suggest £425. Adding to that the freeze on child benefits, reduction of welfare support and housing benefits etc and you see that those on low incomes are suffering a little, and that those without incomes are really going to suffer. It’s not as bad for the poor as many feared, however, and our VAT rates are still lower than in Ireland, Denmark, Hungary, Belgium, Greece and Sweden. Overall the changes may cost around £610 per person.
And whilst VAT is rising to European levels, income tax is staying virtually level. It’s worth noting that those earning £42k per year were paying 60% income tax from 1979-1988 (and much more at times), so those above £20k are probably fairly lucky.
Some have feared that the economic effects will cause a secondary recession. It is definitely a possibility, especially with tax increases, but the fact that the VAT increase doesn’t come into effect until after next Christmas gives us hope that there will be ample spending in the final quarter of this year. More support is given in the budget to the middle classes, in general, and they’re generally the ones who will change their spending. But, even if it’s not as bad as it could have been, we’ll have to wait and see how the economy is affected. Though the UK economy has dropped in value over the last week, it hasn’t faired as poorly as expected.
Obviously, the one thing that unites the country is the welfare state. Everyone is affected by it and damaging effects would be seen as almost as bad as another period of negative growth. £11 billion of cuts are heading towards the welfare state and that is a lot of money. Housing benefit cuts, child benefits’ freeze, public sector pay freeze etc will all cause some problems. But, there isn’t much damage done to pensions, to lower-paid public sector workers etc if we believe the budget at face value. Again, it’s bad but it could be worse.
As for students… Well I’m sure you’ll all be glad to hear that alcohol costs aren’t going up (yay) and that food isn’t always affected by VAT. Unfortunately, various other things that we buy are. Out of a standard £3,000 student expenditure, we’ll probably see £50 extra per year, around the rate of inflation.
However, unemployment is planned to peak at just over 8% in early 2011. We’re not far off the maximum at the moment and what that means is that anyone graduating this year or next will struggle to find employment. For those still in university: the higher education budget is likely to see sizeable cuts – so expect more YUSU campaigning against facility cuts in the next couple of years.
Good piece but a bit wordy.