What does the budget really mean for you?

Let’s look behind the headlines, avoid the spin, and separate the fact from the fiction of this week’s budget

Mother with two young children on sofa

by Anna Birley from UNISON’s policy unit

While goings on in Westminster can feel a long way from normal day-to-day life, the decisions made at the budget by the chancellor have a huge impact on everybody’s work, household finances and the public services we all rely on.

This week’s budget was no different, so let’s break down what the budget means for you and the services you rely on, along with some helpful myth-busting on the way.

What’s happening with my taxes?

The biggest headline, which was trailed days before the formal announcement, was the 2p cut in National Insurance. At first glance, this seems positive – after all, National Insurance is a tax specifically on working people.

However, in practice, this small cut hides a much more troubling picture. At a cost of £10bn, this is a very expensive way to put money back into the pockets of higher income workers.

While the government suggests that it will be worth £450 for the average worker, what this actually means is just £34 back each year for low-income workers, compared to £424 a year for the richest households.

This means almost half of the £10bn spent will end up in the pockets of the richest 20% of households and only 3% will benefit the poorest 20%.

On top of this, other, stealth taxes – measures that were not mentioned in the chancellor’s budget speech but will have a huge impact on household budgets – are more than cancelling out the National Insurance cut.

The personal allowance threshold has been frozen, which means more and more low earners are being pulled into paying taxes, and which is increasing the level of tax that everyone pays, especially lower earners.

The big picture is that taxes haven’t been higher since the Second World War – so the National Insurance announcement is little more than a gimmick. More pain for working people, while the Conservatives play games to try and reverse their electoral misfortunes. On top of that, they cut capital gains taxes, which will benefit landlords and second-home owners, not workers.

Will the budget help grow the economy?

The chancellor claims that tax cuts are the route to growing the economy. But every time he tries this same trick, the economy continues to stagnate. He’s cut National Insurance once already, just a few months ago, in the autumn statement. The result? The UK entered into recession.

At UNISON, we know that tax cuts are not the route to economic growth. Instead, investment in public services is critical to a healthy economy.

People cannot return to work if they are too sick – and they won’t get better if the social care system is in tatters and NHS waiting lists remain so long. Good quality local services, from schools to councils, are the foundation blocks of economic growth.

What about public services?

Instead of investing in essential public services, the chancellor announced further cuts. Instead of investing in police staff to ensure the streets are safe, he announced drones. Instead of funding more nurses, he announced an IT system upgrade.

Public services are on their knees – as are the workers delivering them. Public service workers need a pay rise, not a chancellor telling them to work harder for less.

Is there anything to be positive about?

It’s not all bad news. The Conservatives, clearly out of ideas, stole a couple of good policies from Labour.

They finally decided to abolish the non-dom tax system which allowed people to keep their money overseas without paying taxes, and they extended the windfall tax on the big oil and gas companies that are continuing to profit from high energy bills while polluting the planet.

They also bowed to pressure to extend the Household Support Fund and raise the child benefit taper.

But there’s more to do – these stolen policies are a start, but there is a long way to go to creating a fairer economy.

The chancellor claimed that his party was the only party with a plan for the economy – but when the plan destroys services, keeps wages down and bills high, and pushes the economy into recession, while cutting taxes for the country’s higher earners, then it’s clear the plan isn’t working.

With the right people in power, making the right choices, it is possible to have a thriving economy, driven by a healthy, happy, safe and productive workforce.