The Fairness Concept of the UK Budget - Essay Example

This is a study about the UK budget of June 22nd It is going to have a look at the ‘fairness’ concept. More specifically, the essay will be aiming at giving the most appropriate answer to the study question, “How did the June 22nd 2010 budget reflect fairness in income tax, VAT, Capital gains tax and corporation tax?” The aspect of fairness will precisely narrow down to the impact of the budget on households of UK. The BBC news argument on the budget making the poorest experience a harder life will be of focus also. On the 22nd of June 2010 the Exchequers’ chancellor made a presentation of the budget in focus to the parliament. The hmrc.gov.uk website states that the effect of the budget to individuals maybe viewed from the many fronts. Under capital gains, there was to be two capital gains’ rates of tax, (that is, 28% and 18%) from the previous single rate of 18%. The individuals’ tax will be dependent upon the total taxable individual’s income. Those gains that may qualify for relief for entrepreneur will be taxed at 10%. Gains qualifying for relief for entrepreneurs would be escalated to £5 million from £2 million. Also, the budget would reduce the eligibility for credit relating to families whose income is more than £40,000. The budget also seeks to serve the good of all people of UK. According to chancellor, after the recession since the World War II there was a devastating effect. This budget of June 2010 brings into account the five-year plan aimed at rebuilding the economy of Britain while upholding the values of freedom, fairness and responsibility. Public finances are set to be put under control by this budget. (hm-treasury.gov.uk, 2010) As per the Great Britain: Parliament book, the budget was a welfare budget. The budget was full of significant policies upon tax, benefits and credits after tax. The chancellor put emphasis on the fact that there had been a big increase in costs of welfare and had also made a big contribution to the budget deficit. Welfare expenditure had risen from £132 to £192. The budget according to the chancellor had a major goal of making the entire welfare system upon a better affordable and sustainable footing. This would save the nation about £11 billion by the time 2014 or 2015 sets in. (Great Britain, 2010 p26) Under various tax heads, the impact on individual households was to be as follows: under income tax, personal allowances for persons below 65 years would be raised to £7,475 from £6,475 for the budget year 2011/2012. This would, however, be viewed not to focus totally on the poor since the persons qualifying for the individual personal allowances had to fall under the 20% income tax bracket. Child benefits would also be made available to ever parent who has children below 16 years of age. The benefit would be frozen up to year 2014, when this money saved would be transformed to the credits for child tax. Credits for child tax as well as working credits would be gradually withdrawn from those families with aggregate income of approximately £40,000 or above. The special rate for babies would also be withdrawn simultaneously; however, the child element for poor families would rise to £150. There is also the trust fund for children set up by the government to ensure that children who are born after year 2002, there would be more savings of around £1,200 per annum to every account by any person. Under corporation tax, the small amounts of profits will have their corporation tax rates by 1% from 21% to a rate of 20% as from year 2011. These profits that are rated small are those profits below £300,000 and the requirement is that there should be no associate companies. Also for huge companies a rate of corporation tax would fall from 28% to a rate of 27% per annum. Capital allowances would also be lowered as from year 2012. The major pool rate would also be lowered as from year 2012. The major pool rate would also be lowered from the rate of 20% to the rate of 18% as from April 2012. The special pool would also have its rate go down from 10% to 8%. VAT would, however, not be seen to favour the poor households since it was set to rise by 21/2% from 171/2% to a rate of 20% as from year 2011. Those commodities that were formerly exempt or that were subject to 0% VAT rate, or even 5% were not to be impacted by this change. Thus, the lower rates would not be affected by the rise and this would be seen to favour the poor households. (forbes-young.com, 2011) Other issues notable in the budget that would favour the poor households and that were to be implemented are as follows: besides the health as well as the overseas aid all departments of the government would have their budgets sliced by a quarter. The workers in the public sector would be required to make suggestions on savings. There would also be a major review on the comprehensive expenditure and those results of the review would be made public in the month of October year 2010. In the pay freeze set out to be applied for two years for all the workers in the public sector, it would not affect some 1.7 million employees who were rated low-paid. That is, those workers getting below £21,000 per year. There would be a flat increase rate of around £250 per annum to the low paid workers instead. While concluding the essay and in trying to answer the study question, “How did the June 22nd 2010 budget reflect fairness in income tax, VAT, Capital gains tax and corporation tax?”, it is of importance to note that the aged were also not left out. The age for qualifying for pension would be raised from 65 to 66 years. The component of individual income of housing benefit would also be revised to put the maximum limit at £400 per week and a package of £1.8 billion per annum set aside for the purpose. The other thing about leaving the poor households worse off is the grant of ‘health in pregnancy’. This, according to the budget would be scrapped off. Besides, the sectors of defence and education would be under protection according to Oldfield would be under protection to a given extent from the existing huge cuts. These undertakings by the government in the budget are also seen to have increased the cost of living of the households. This is especially the poor households. (Oldfield, 2010) Reference list: forbes-young.com. (2011). Budget - 22nd June 2010. Retrieved 21 March 2011 http://www.forbes- young.com/contractor_resources/tax_centre/budgets/budgets.php?b=recent_budget Great Britain: Parliament: House of Commons: Treasury Committee. (2010). June 2010 Budget: First Report Of Session 2010-11, Report, Together With Formal Minutes, Oral And Written Evidence. The Stationery Office. p 26. hmrc.gov.uk. (2011). Budget 2010: Individuals. Retrieved 21 March 2011 http://www.hmrc.gov.uk/budget2010/individuals.htm hm-treasury.gov.uk.(2010). 2010 Budget: Responsibility, freedom, fairness: a five year plan to re-build the economy. Retrieved 21 March 2011 http://www.hm- treasury.gov.uk/2010_june_budget.htm Oldfield, Martin. (2010). The UK Emergency Budget – 22 June 2010. Retrieved 21 March 2011 http://www.suite101.com/content/the-uk-emergency-budget--23-june-2010-a251749 Read More