There was some good news in the Autumn Statement, which turned out to be kind of mini budget. The tax threshold for Income Tax has been raised again, this time to £9440, helping income taxpayers with lower bills. Both Coalition parties are keen on this tax cut.
The planned increase in fuel duty by another 3p has been cancelled. Whilst this does not make us any better off, it does remove a nasty threat to family budgets for the New Year. Petrol and diesel is quite dear enough, with another hike in taxes. Tax already accounts for more than 60% of the pump price, so motorists are making a big contribution to paying for the public sector.
The Chancellor also decided to cut Corporation Tax on company profits to 21% in 2014. I think this will raise more money from companies, not less. As we have seen in the last few days, large companies are able to switch revenue and profits around the world to places where the tax rates are lower, and get away with it under the different legal and accounting rules. Many people are angry that some large companies do not pay enough tax on their activities in the UK. There are limits to what a single medium sized country can do about this, as our tax gain would be another country’s tax loss. Setting lower rates makes it likely companies will invest more here, do more business here, and book more of their revenues and profits here. Taxpayers should benefit from the move. Of course the beefed up Inland Revenue will also check up that all companies are obeying the tax laws.
The independent Office of Budget Responsibility sets out the official forecasts. They think the economy will grow next year, and pick up speed in the following three years. They also think our real incomes will start to rise again, with better increases in wages and salaries as the recovery gets underway. Let’s hope they are right. My worry is they have been far too optimistic before. To make sure we are going to enjoy rising living standards, more jobs and better wages, I think the government needs to take more action.
I am still pressing for tougher action to sort out RBS/Nat West and Lloyds/HBOS, the banks with state shareholdings. We require stronger banks able to lend more to the next generation of homebuyers and small businesses that we need to propel us forward. I also think we need lower tax rates in some cases, to boost growth and boost revenues. I am all too conscious that many of my constituents are in the 40% tax band, where income tax has been tougher than lower down the income scale, and where changes to Child Benefit above £60,000 are not helpful either.
There are still plenty of ways of doing more for less in parts of the public sector. The government needs to press on with controlling inward migration, to keep down the costs of additional public sector services for a rapidly growing population. It also needs to weed out the parts of the Overseas Aid and EU budgets that do not give us value for the larger sums we are spending.