JAMES CONEY
The five things Rishi Sunak should have done
1) Put off the national insurance rise
The chancellor said last year that he would be bringing in from April a new health and social care levy of 1.25 per cent that would raise £12 billion. But what’s the point in bringing this in if you are going to give half of it back by raising national insurance thresholds and giving away £6 billion? As Paul Johnson from the Institute for Fiscal Studies pointed out, the idea that this cash was ring-fenced was a “myth”. And what is the point of bringing in a tax that cannot be fully implemented this year anyway? Pensioners do not pay until 2023.
The facts have changed. A levy when households face a huge squeeze in living standards is disastrous. There would have been no shame in delaying it.
2) Change the tax thresholds
Since the previous budget the Treasury has had a £7.5 billion windfall in tax receipts because it barely moved income tax thresholds between 2019 and 2022 and has frozen them until 2026. The effect of this is to drag huge numbers of workers into higher tax. Instead of pay rises helping to combat rises in the cost of living, the money is going to the Exchequer. Families need money in their pockets. The income tax thresholds should be moved up with inflation.
3) Boost state pensions
The state pension triple lock was put on hold this year because of the pandemic and although pensions will rise in April, they will rise by September’s 3.1 per cent inflation figure even though inflation is likely to be 7 per cent by then. Those on the old basic state pension will get £141.85 a week, up from £137.60, while the new full state pension will be £185.15, up from £179.60.
Pensioners will get a big boost next year because the 2023 figure will be set this September. But it’s all just too late. The chancellor should have passed on a bigger rise now when it is needed.
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4) Childcare help
Nurseries are facing soaring costs from heating, food and wages. Parents need to work to get pay rises to protect their families from rising costs. The chancellor should have done two things. First he should have increased the point at which child benefit is removed from families to match the earnings threshold for paying 40 per cent income tax (£50,270). Presently, child benefit is taken away when one person in a household earns more than £50,000, meaning that basic rate taxpayers lose it.
Second, the chancellor should have boosted the childcare hours scheme to ensure that it covers all nursery costs such as meals and admin. Also, you can only claim this when your child is three or four, which stops many parents going back into the workforce. It should be extended to children aged between one and four.
5) Stop the student loan raid
The single biggest revenue raiser from the chancellor was one that he did not even mention in his speech: his plan to extend student loan repayments to 40 years and lower the salary at which they start being repaid. It will make the Treasury £35 billion over five years. That’s money straight from low-earning students, who could now end up paying £100,000 for university. A low-earning graduate has a marginal tax rate of 42.25 per cent for four decades. With cost-of-living and house-price rises they face an impossible task to get by. We don’t need tweaks to student finance, we need a wholesale rethink
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