A Budget to help poorer people?

Posted in Blog | Mar 21, 2012 | By: Julia Unwin

We all know Budget 2012 is going to be tough. We’ve been told this often enough, and the eminent Tony Travers reminds us that the choices in front of the Chancellor are real and his room for manoeuvre limited.

So is there anything the Chancellor could do to help poorer people? Here are the five things I would like to see in the 2012 Budget:

• Raise the income tax threshold
  According to our Minimum Income Standard research, a single person needs to earn at least £15,000 per year before tax to afford a minimum standard of living. By raising the threshold at which income is taxed, people would need to earn a lower amount to reach that standard. If a single person paid no tax, for example, they would only need to earn £12,600. Raising the income tax threshold to £10,000, as the Coalition Government intends, would therefore make it easier for poorly paid people to achieve a decent standard of living.
• Incentives to build more houses – for sale and for rent
  The shortage of housing across all tenures drives the dangerous volatility in the housing market, which in turn fuels the potentially catastrophic boom and bust of the last three decades that has damaged so many lives. Fiscal incentives to encourage house building would re-energise the largely moribund building sector, create jobs and revive the supply chain.
• Reform Council Tax and Stamp Duty
  A ‘mansion tax’ might be a step in the right direction, but it’s no silver bullet: it ignores the much bigger question of the UK’s outdated property tax system and its role in creating volatility in the housing market. A Council Tax based on 1991 valuations and an illogical number of bands is regressive and means lower-value properties pay a proportionally higher rate. A national property tax with a finer structure would be a fairer way of taxing property and would help dampen housing volatility. Reforming Stamp Duty to ensure that a higher rate was applied only on the portion above a property’s value would also be fairer.
• Incentives to kick start growth in the right places
  This government risks repeating the mistakes of the previous one by focusing too intently on tax and benefit incentives as the solution to poverty. We need a labour market revolution to generate decently paid, flexible jobs that can ensure work is a route out of poverty. This desperately needed growth needs to happen in the places where people need the work.
• Accept and implement the Dilnot proposals
  The Dilnot Commission sets out a clear plan of action and it should be implemented. It would provide certainty for all of us and allow us to plan for the inevitable vulnerability of old age. It would also allow the market to develop products that we could invest in. The funding gap in social care is something Budget 2012 must address; we simply cannot afford to wait any longer.

Julia Unwin is Chief Executive of Joseph Rowntree Foundation and the Joseph Rowntree Housing Trust. 

This post is cross posted from the Joseph Rowntree Foundation Blog