Budget Day Statement

The Chancellor said that he would be introducing a principled approach to taxation: the first help would be for families. Alas he did not do that today.

Rishi Sunak announced that National Insurance starting thresholds will rise to £12,570 from July and said hard-working people will keep more of what they earn before they start paying personal taxes.

The cut in national insurance, which he said was worth over £6 billion, will benefit almost 30 million working people with a typical employee saving over £330 in the year from July.

He also announced that the basic rate of income tax will be cut by 1p in the pound in 2024. The cut, which is worth £5 billion, will be the first cut to the basic rate in 16 years.

Tax and the Family do not think this very expensive package is a well-directed means of supporting struggling families. It is not focussed on struggling families. Most of £6 billion will end up in the bank accounts of households in the better off half of the population most of whom don’t have children.

The increase will not help those out of work or on low incomes, while those on universal credit will see their credit cut by 55% so that in all they will gain 45% less than others. It will give twice the help to families with two earners than to those with one earner or two earner families, even though one earner families may well be in greater hardship. It will help people without children as much as those with children even though it is the cost of food, clothes and suchlike for children which has a major impact on household bills.

The most effective means of giving help immediately to many of those in greatest need would have been to increase the rate of child benefit. This has hardly been increased in the last ten years and is now worth much less in real terms than before.

Families in poverty pay income tax. There is an urgent need to rethink the way income tax works for families. It dates from 1990 when many of today’s parents were not even born and those who were were still in school. The system introduced in 1990 may have met the needs of families then. It does not meet the needs of today’s families. The Chancellor missed a great opportunity to really help struggling families.