Credit Action - Better thinking about money
About us Training Resources Publications Publications Ongoing Projects Press Section Advocacy

The Pre-Budget Report 2009 – What it means for individuals and consumers

With the chancellor Alistair Darling having just announced the Pre-Budget Report (PBR) for 2009 Credit Action has produced this summary of the main issues of concern for individuals and consumers.

So what are the main talking points in a year that has seen the UK struggle to escape from recession, a ballooning public deficit, high unemployment and public outcry over banking bonuses?

In a year of great economic upheaval there has been little apparent change in the chancellor's original budget while uncertainty remains about where public sector cuts will be made. The government's focus remains on inducing economic growth as opposed to tackling the deficit, yet in a gloomy forecast the chancellor predicted that the economy would shrink by 4.75% this year while public borrowing for 2009 is to be £178bn.

As taxpayers we have all felt the pinch in bailing out certain banks and the emptying of the state coffers has angered many, particularly as the banks look set to pay out bumper bonuses this year. It was therefore no surprise that the chancellor announced a one-off 50% tax on bonuses over £25,000 to be paid by the banks in an effort to placate the general public.

So what measures in today's PBR directly impact individuals and consumers on a daily basis? Well the main issues of interest to individuals and consumers are a rise in national insurance contributions and an increase in the rate of VAT. In addition the basic state pension will increase by 2.5% while there were also promises of continued support for youth unemployed.


National Insurance Contributions

A one-off tax on banker's bonuses will be overshadowed by the chancellor's announcement that all employer, employee and self-employed rates of National Insurance will rise by a further 0.5% from April 2011 (on top of the initial 0.5% previously proposed), but those who earn £20,000 or less will be protected from the increase.


VAT

The rate of VAT, or value-added tax, has risen from 15% to 17.5% which means that a range of consumer goods will see an increase of 2.5%, or just over 2p for every pound. For example a £10 CD will now cost £10.22 or more if companies decide to round up.

If you pay for goods in full before January 1st then you won't be affected but if you pay for over six months then the balance may be charged at the new rate. New Year sales may offset VAT increases while certain retailers may delay the introduction of the VAT increase.

However, the chancellor has announced that he has no plans to further increase the rate of VAT.


Pensioners

"In the past old people were allowed to drift into unemployment" announced the chancellor. In an effort to tackle this phenomenon the over-50s will now get training and support to help them into work while it will be easier for those over 65 to receive the working tax credit as the hours they need to work to qualify will be cut.

On a more concrete note for pensioners the basic state pension is to rise by 2.5% from April 2010, a 4% increase in real terms.


Youth

On the issue of growing youth unemployment the chancellor said that the education or training guarantee for 16 and 17-year-olds is to be extended for a further year so that anyone under 24 will also be guaranteed training or employment after six months out of work.


Families

The flexible tax credits system for families in difficulty will be continued. Although the stamp duty holiday will finish in January there will be continued support from the government to help homeowners avoid repossessions. An extra 200m has been promised to help make homes more energy efficient and a boiler scrappage scheme has been introduced. Lastly Mr. Darling promises to extend free school meals to 500,000 children.

Please continue to visit the Credit Action website for further updates on the PBR in the coming days.

 

 

Write a comment

  • Required fields are marked with *.

If you have trouble reading the code, click on the code itself to generate a new random code.