Wages still won’t last the month

Chancellor George Osborne today (March 18) unveiled the government’s pre-election budget, calling it a triumph for working people.

 
In an obvious attempt to pander to the electorate, with the general election being less than seven weeks away, Osborne has raised the tax-free personal allowance threshold to ÂŁ10,800 to go into effect next year after being set to rise to ÂŁ10,600 in April. This means that anyone earning below the threshold will not pay income tax.

 
Sounds great in theory, but how much do such tax sweeteners really benefit working people, as Osborne claims?

 
The coalition government has presided over a swell in low-paid, part-time and insecure jobs. The typical working person of 2015 is not the working person of yesteryear, when jobs were highly skilled, unionised and decently paid.

 
In fact, nearly 5m people today earn below ÂŁ10,000. This means that, as the Guardian pointed out today, any increase in the personal allowance threshold does nothing for those millions who are struggling on such meagre wages. If you earn ÂŁ10,000 now, your income will not be affected—and you’ll see no additional benefit–no matter how many times the threshold is raised.

 
And each time the threshold is raised, a greater and greater share of low-paid earners will not see any additional benefit from income tax relief.

 
Any tax benefits handed out for saving for retirement are not within reach of these workers either. If you are among the millions who earn below ÂŁ10,000, you miss out on 20p in tax relief for every ÂŁ1 you put away into retirement savings. This is also true for donations to charities. If you earn above the threshold, you can claim back part of a donation as Gift Aid. If you earn below the threshold, you lose out.

 
The New Statesman noted that the personal allowance tax giveaway masquerades as a leg- up for those on low-income but in fact benefits the rich the most – for example, a raise in the threshold to £12,500 would benefit the poorest 20 per cent of households by £28 a year, but would net the wealthiest 20 per cent an additional £445 every year.

 
Hiking the personal allowance threshold will, after the latest increases, cost the government roughly £14bn, according to the Resolution Foundation. That would mean that any revenue generated from the dramatic 2011 Osborne-led hike in the VAT—the tax that has slammed the poorest, who spend nearly all of their income on consumer goods, the hardest—will be completely erased.

 
In effect, all the additional tax burden that the poor have carried for the past four years will have been for nothing, except to cut the rich some slack.

 
Unite general secretary Len McCluskey argued that such tax giveaways benefiting the already well-off represent yet another instance of business-as-usual for the coalition government.

 
“Behind the short-term sweeteners and budget bluster, the reality for millions is that their wages won’t last the month,” he said.

 
“Osborne’s is not an economy where the gains are shared fairly, and people know this all too well,” McCluskey added. “Take away today’s gimmicks and this budget is a window onto five more years of Tory rule.

 
“If you’re a hedge fund, wealthy retiree, or a business shy of providing fairly paid, secure employment, Osborne’s Britain is the place for you. If you’re looking for decent job, a home in which to raise your kids or a safe NHS, then it is not.”