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Hunt defends tax rises for middle earners

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Chancellor Jeremy Hunt has defended his economic package as “balanced”, after a think tank said it piled more pressure on “squeezed” middle earners.

The Resolution Foundation said freezing tax thresholds hit those on middle incomes as well as the richest.

And the Institute for Fiscal Studies said this group would see the biggest hit to living standards.

But Mr Hunt said it was not possible to raise £25bn of taxes by focusing on a very small group of rich people.

The UK is facing its biggest drop in living standards on record, as the soaring cost of living eats into wages.

The government’s independent forecaster, the Office for Budget Responsibility (OBR), said the tax burden would rise to its highest level since the end of World War Two as a result of the plans set out in the chancellor’s Autumn Statement on Thursday.

It also said, once rising prices are taken into account, household income would fall by 7% over the next 18 months.

Mr Hunt said tough decisions were needed to bring down rising prices.

Appearing on BBC Radio 4’s Today programme, he denied his plans amounted to a raid on millions of working people, saying they asked “people who have more to contribute more”.

“We want to take these difficult decisions in a fair way,” he said, adding that the most vulnerable people and public services would be protected.

The Resolution Foundation said increasing benefits in line with inflation would make a “huge difference” to those on low-to-middle incomes.

However, it said making energy support less generous from April would mean households were “far more exposed” to rising bills.

For a typical household, annual energy bills will rise to around £3,000, up from the current level of £2,500.

The Resolution Foundation said the focus on “stealth taxes” – freezing tax thresholds to raise revenue – meant those on middle incomes were being squeezed as well as higher earners.

Threshold freezes mean that a pay rise is more likely to drag someone into a higher tax threshold.

The independent Institute for Fiscal Studies said “Middle England” was “set for a shock”.

Director Paul Johnson said this group would not benefit from targeted energy support but their wages were falling and taxes rising, with higher taxes looking “to be here to stay”.

“The truth is we just got a lot poorer. We are in for a long, hard, unpleasant journey; a journey that has been made more arduous than it might have been by a series of economic own-goals,” he said.

Mr Hunt denied he had been forced to raise taxes and reduce spending because of the turmoil caused by his predecessor Kwasi Kwarteng’s tax-cutting mini-budget.

He said there had been mistakes, but insisted the government had “corrected those within weeks” and other countries were also facing similar problems due to the war in Ukraine and the rise in energy prices.

Graphic showing how threshold freezes will affect most taxpayers by 2023-24, with basic rate payers paying an extra £298, higher rate payers £670 and additional rate payers £761

In the next two years, before the next general election is due, there will be further support for households and extra money for schools, the NHS and social care in England.

But after 2025 spending cuts are set to kick in for many departments.

Mr Hunt denied he had put off difficult decisions, arguing that during a recession it was important to support the economy.

Among the key measures in his statement were:

  • Tax thresholds will be frozen until April 2028, meaning millions will pay more tax
  • Spending on public services in England will rise more slowly than planned – with some departments facing cuts after the next election
  • The state pensions triple lock will be kept, meaning pensioners will see a 10.1% rise in weekly payments, in line with inflation
  • The household energy price guarantee has been extended for one year beyond April but made less generous
  • There will be additional cost-of-living payments for the “most vulnerable”, with £900 for those on benefits, and £300 for pensioners
  • The top 45% additional rate of income tax will be paid on earnings over £125,140, instead of £150,000
  • The UK minimum wage for people over 23 will increase from £9.50 to £10.42 an hour, with the rates also increasing for younger age groups
  • The windfall tax on oil and gas firms will increase from 25% to 35%, raising £55bn from this year until 2028
  • A planned £86,000 cap on personal social care contributions in England, which had been due in October 2023, has been delayed by two years

The OBR said rising prices and interest rates would tip the economy into a recession “lasting just over a year”, as consumers spend less and businesses cut investment.

It expects the UK economy to shrink by 1.4% in 2023 before growth gradually picks up again.

 Fairer tax choices could have been made – Labour’s Rachel Reeves

Labour’s shadow chancellor Rachel Reeves accused the government of increasing taxes by “stealth” and said “fairer choices” could have been made.

She criticised the Conservatives for not abolishing non-dom tax status and instead going to the “pockets of the ordinary working man and woman”.

Liberal Democrat Treasury spokesperson Sarah Olney said “struggling families who have worked hard for years have had their security stolen”, while “the already squeezed middle are being pushed to the brink”.

Some Tory MPs were also critical of plans to increase taxes, especially during a recession.

Others are seeking assurances that the government will not increase fuel duty. The tax is supposed to rise in line with inflation but has been repeatedly frozen.

The Treasury said a final decision would not be taken until the next Budget in spring 2023.

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Politics

Gething downfall delivers Starmer 1st headache

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Just when you’d have been forgiven for thinking politics might quieten down a bit…

The Welsh Labour government was for so long a case study in how the party could operate in power during its long years of opposition at Westminster.

And yet here we are less than a fortnight into a UK Labour government, and the Welsh Labour government is imploding.

So much for all that talk about bringing stability back to politics.

Last week Vaughan Gething was sharing smiles here not just with the new prime minister but the King too.

Now, he’s a goner, delivering Sir Keir Starmer a headache rather than a handshake.

When I was here in March covering Mr Gething’s victory, the seeds of his political demise were germinating before our eyes.

The donations row had already sprouted and his defeated opponent, Jeremy Miles, legged it from the venue without so much as any warm words about the victor on camera.

It was another sign of the cultivating anger, the political knotweed that would soon flourish and ensnare Vaughan Gething.

Along came the row about alleged leaking, a sacking, a confidence vote — and a first minister whose tenure up until today at least amounts to 2.4 times that of Liz Truss. Ouch.

Westminster has generated its fair share of turbulence in the last decade.

But it is far from unique as a source of turbulence in UK politics.

In February, Michelle O’Neill became first minister of Northern Ireland with Emma Little-Pengelly her deputy, after a long period without devolved government at Stormont.

In March, we had a new first minister of Wales, when Mark Drakeford stood down and Vaughan Gething took the job.

In April we had the resignation of the first minister of Scotland Humza Yousaf.

He was replaced the following month by John Swinney. June was the quiet month then. Just the small matter of a general election campaign.

And here we are in July, and Mr Gething is resigning.

So will begin another leadership race, a new government in Wales, a new first minister and a new team of senior Welsh ministers.

There will also be more arguments about Welsh Labour – its direction, its priorities, its capacity to govern effectively and its relationship with the UK party.

If you’re watching this in Downing Street, it’s the last thing you need.

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Shoplifting crackdown expected to be unveiled

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A crackdown on shoplifting is expected to be announced in the King’s Speech on Wednesday.

The government is due to unveil a new crime bill to target people who steal goods worth less than £200.

The policy would be a reversal of 2014 legislation that meant “low-value” thefts worth under £200 were subject to less serious punishment.

The government is also expected to introduce a specific offence of assaulting a shop worker to its legislative agenda.

It will not be clear until legislation passes through Parliament what the punishments for any new or strengthened offences would be.

Data from the Office for National Statistics shows that last year was the worst on record for shoplifting in England and Wales.

Police recorded over 430,000 offences in those nations in 2023 – though retailers say underreporting means these figures are likely to represent only a fraction of the true number of incidents.

Michelle Whitehead, who works at a convenience store in Wolverhampton, said her shop had been “hit every day” by thieves.

People were stealing “absolutely anything” including “tins of spam, tins of corned beef, all the fresh meat”, Ms Whitehead told BBC Radio 4’s World at One programme.

“They’re just coming in, getting their whole arm and sweeping the lot off the shelves,” she said. “The shelves were always empty.”

She said she believed “organised” criminal gangs, rather than individuals struggling with the cost of living, were behind the thefts in her shop.

The crackdown on “low-value” shoplifting “will help a lot of little shops,” Ms Whitehead said.

While retailers and shop workers have welcomed the anticipated proposals, a civil liberties group has raised concerns about criminalising people struggling to make ends meet and overburdening the prison system.

The new legal measures are expected to be announced as part of the King’s Speech on Wednesday, a key piece of the State Opening of Parliament that allows the government to outline its priorities over the coming months.

Before the general election, the Labour Party pledged to reverse what it described as the “shoplifter’s charter” – a piece of 2014 legislation that reduced the criminal punishment for “low-value shoplifting”.

Tom Holder, spokesperson for the British Retail Consortium (BRC), told BBC News the impact of the 2014 legislation has been to “deprioritise it in the eyes of police”.

“I think police would be less likely to turn up to what they see as low-level theft,” he said.

Shoplifting cost retailers £1.8 billion in the last year, which could impact prices, according to the BRC.

“Shoplifting harms everyone in that sense – those costs eventually get made up somewhere, whether it’s prices going up or other prices that can’t come down,” Mr Holder said.

Co-op campaigns and public affairs director Paul Gerrard said the supermarket chain had also recorded rising theft and violence against shop workers.

“There’s always been people who will steal to make ends meet. That’s not what is behind the rise we’ve seen,” he told BBC Radio 4’s Today programme on Tuesday. “What’s behind that rise is individuals and gangs targeting large volumes of stock in stores for resale in illicit venues like pubs, clubs, markets, and out the back of cars.”

But Jodie Beck, policy and campaigns officer at civil liberties organisation Liberty, had concerns about the expected proposals, saying there is “already a wide range of powers” the police can use to tackle shoplifting and anti-social behaviour levelled at retail staff.

Ms Beck said the “£200 threshold” would not just target criminal gangs but also “people who are pushed into the desperate situation of not paying for things” because they cannot afford to make ends meet.

She urged the government to avoid focusing on “criminal justice and policing solutions instead of doing the thoughtful work of looking at the root causes of crime, which we believe are related to poverty and inequality”.

Ms Beck also argued the additional legislation could serve to worsen the UK’s “enormous court backlog” and its “bursting prison system”.

Last week, Justice Secretary Shabana Mahmood announced plans to release thousands of prisoners early to ease overcrowding in the country’s prisons.

A spokesperson for Downing Street said the government would not comment on the King’s Speech until it has been delivered by the monarch.

The National Police Chiefs’ Council has been approached for comment.

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Politics

Government launches ‘root and branch’ review

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Defence Secretary John Healey hailed the government’s defence review as the “first of its kind” and said it will “take a fresh look at the challenges we face”.

Mr Healey noted the “increasing instability and uncertainty” around the world, including the conflict in the Middle East and war in Ukraine, and said “threats are growing”.

The strategic defence review will consider the current state of the armed forces, the threats the UK faces and the capabilities needed to address them.

Sir Keir Starmer has previously said the review will set out a “roadmap” to the goal of spending 2.5% of national income on defence – a target he has made a “cast iron” commitment to but is yet to put a timeline on.

On Monday, the prime minister said the “root and branch review” of the armed forces would help prepare the UK for “a more dangerous and volatile world”.

The review will invite submissions from the military, veterans, MPs, the defence industry, the public, academics and the UK’s allies until the end of September and aims to deliver its findings in the first half of 2025.

“I promised the British people I would deliver the change needed to take our country forward, and I promised action not words,” Sir Keir said.

“That’s why one of my first acts since taking office is to launch our strategic defence review.

“We will make sure our hollowed out armed forces are bolstered and respected, that defence spending is responsibly increased, and that our country has the capabilities needed to ensure the UK’s resilience for the long term.”

The review will be overseen by Defence Secretary John Healey and headed by former Nato Secretary General Lord Robertson along with former US presidential advisor Fiona Hill and former Joint Force Commander Gen Sir Richard Barrons.

The group will have their work cut out.

The global security threats facing the UK and its Western allies are more serious and more complex than at any time since the end of the Cold War in 1990.

They also coincide with what many commentators have said is a catastrophic running down of the UK’s armed forces to the point where the country is arguably no longer considered to be a Tier One military force.

In terms of the number of troops in its regular forces, the British Army is now at its smallest size since the time of the Napoleonic Wars two centuries ago.

Recruitment is failing to match retention, with many soldiers and officers complaining about neglected and substandard accommodation.

The Royal Navy, which has spent vast sums on its two centrepiece aircraft carriers, is in need of many more surface ships to fulfil its tasks around the globe.

Its ageing fleet of nuclear-armed Vanguard submarines, the cornerstone of the UK’s strategic defence and known as the Continuous At Sea Deterrent (CASD), is overdue for replacement by four Dreadnought class submarines and costs are mounting.

Commenting on the review, Mr Healey said: “Hollowed-out armed forces, procurement waste and neglected morale cannot continue.”

Too many UK commitments?

The defence and security threats facing the UK, Nato and its allies further afield are multiple.

They include a war raging on Europe’s eastern flank in Ukraine against Russia’s full-scale invasion. The UK, along with the EU and Nato, has opted to help defend Ukraine with multi-billion pound packages of weapons and aid, stopping short of committing combat troops.

The policy behind this is not entirely altruistic. European governments, especially those closest to Russia like Poland and the Baltic states, fear that if President Putin wins the war in Ukraine it will not be long before he rebuilds his army and invades them next.

Some of those countries are already busy beefing up their own defence spending closer to 3% or even 4% of GDP.

The challenge for Nato has been how to provide Ukraine with as much weaponry as it can, without provoking Russia into retaliating against a Nato state and risk triggering a third world war.

The Royal Navy has been in action recently in the Red Sea, where it has been operating alongside the US Navy in fending off attacks on shipping by the Iranian-backed Houthi rebels in Yemen.

But the UK has also made naval commitments further afield in the South China Sea with the Aukus pact, comprising of Australia, UK and the US, aimed at containing Chinese expansion in the region.

Critics have questioned whether a financially-constrained UK can afford to make commitments like this on the other side of the world.

Closer to home in Europe, there is a growing threat from so-called “hybrid warfare” attacks, suspected of coming from Russia.

These are anonymous, unattributable attacks on undersea pipelines and telecoms cables on which Western nations depend.

As tensions increase with Moscow there are fears such actions will only increase and the UK cannot possibly hope to guard all of its coastline all of the time.

But while those nervous Nato partners living close to Russia’s borders are busy beefing up their defence spending closer to 3 or even 4% of GDP, the UK has so far declined to put a timetable on when it will raise its own defence spending to just 2.5%.

Opposition figures have criticised the government for refusing to say when defence spending will be increased.

Before his election defeat, former prime minister Rishi Sunak committed to reaching 2.5% by 2030.

Shadow defence secretary James Cartlidge previously said: “In a world that is more volatile and dangerous than at any time since the Cold War, Keir Starmer’s Labour government had a clear choice to match the Conservatives’ fully funded pledge to spend 2.5% of GDP on defence by 2030.

“By failing to do so, they’ve created huge uncertainty for our armed forces, at the worst possible time.”

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