Budget 2012: Give to the rich, give to the poor
By Alex Stevenson
George Osborne is to help the very richest as well as the poorest in society in his third Budget later.
The chancellor is expected to press ahead with cuts to the 50p top rate of income tax, imposed on those earning over £150,000, in a bid to encourage high earners to lead the economic recovery.
It is not expected to be cut completely, however, with a reversion to the previous top rate of 40%. A 45p rate is now thought to be most likely.
Chris Nicholson, director of the liberal thinktank CentreForum, wrote for politics.co.uk: "There is a strong case in the medium- to long-term for dropping the 50p tax rate but retaining it over the next few years will raise revenue and help to show that we really are 'all in it together'."
Emma Boon, communications director for the Taxpayers' Alliance, insisted that scrapping the 50p rate "makes economic sense" in her article for this website.
She wrote: "It deters people from working harder and earning more money, and no successful economy has ever grown by soaking wealth creators.
"The rest of us have to pick up the slack and pay more for the luxury of spiting those who are successful."
In return the Liberal Democrats have secured a number of measures which will penalise the rich in other ways. The coalition's junior party has not secured its 'mansion tax' on homes worth over £2 million, but stamp duty on properties above this value is to jump upwards to seven per cent.
Critics are questioning whether the move will be as effective, however, as stamp duty is currently easily avoidable through loopholes. Mr Osborne is expected to announce broad measures to tackle currently legal tax avoidance measures.
Steps to help those on the lowest incomes are also expected this lunchtime. Moves to raise the threshold below which no income tax is paid at all to £10,000 by 2015 are being accelerated, with the threshold set to reach £9,025 in April 2013.
What Ed Miliband calls the 'squeezed middle' are not thought to be substantially affected by any of the changes, despite Mr Osborne having at least an extra £5 billion to play with. The government is not thought to have borrowed the £127 billion forecast by the Office for Budget Responsibility.
"If this is how things play out, the chancellor will present Labour with a big opportunity," the Demos thinktank's deputy director Duncan O'Leary wrote for politics.co.uk.
"So far, Ed Miliband's talk of the 'squeezed middle' has resonated, but he has not done enough to explain what is causing the squeeze on living standards, or what might be done about it. Tax reform is one area that could start to change."
Changes to child benefit set for next year, which would not be available to any family where either parent earns over £44,000, are expected to be made fairer.
Mr Osborne will also update MPs on the state of the economy, which the OBR had forecasted would grow by 0.7% in 2012.
Experts have said the outlook has improved since the autumn statement, meaning that figure is likely to increase slightly.
"It does look as if we've started 2012 with a bit of positive momentum," the IPPR thinktank's chief economist Tony Dolphin told politics.co.uk's Budget preview podcast.
He cited positive consumer spending, housing and business survey data before suggesting that talk of "recession" in the autumn statement would not be repeated later today.
"If you ask me today, it seems rather less likely the economy will shrink in the first quarter of the year than it did in November," he added.
