Thursday, July 09, 2015

I warn you not to be poor

Does anyone benefit from the budget?

I put in my 'average' family circumstances, age, 2 children etc. to the BBC's budget calculator, and had a play around with some figures

Salary £10,000   lose £1484
Salary £15,000    lose £1182  (this is just roughly what someone working full time on the new 'National Living Wage' would earn, except it's not a living wage)
Salary £25,000    lose £1351
Salary £35,000    better off by £80
Salary £45,000    better off by £141
Salary £55,000    better off by £141

Everyone who benefits from the welcome rise in the minimum wage will be slapped straight back down again by the cuts to tax credits. If you're working 40 hours a week on the minimum wage now (£6.50) you'll earn £13,520 a year. The increased minimum wage raises this to £14,976. 81% of that increase of £1456 wont be seen. That's one heck of a marginal tax rate. Someone earning that level by working part time, at a rate already above £7.20 per hour will simply lose out with no compensating rise in income.

Whilst someone earning over £50k a year could probably find nearly £1500 of savings in their annual budget (cheaper holiday, cancel the Sky subscription, shop around for haircuts), I have no idea how you do that on £10,000 a year.

At the bottom end of the pay scale, this is pretty much a direct swap of pay for tax credits, transferring the financial burden from the state to the employer. Of course the employer has the option to sack the worker, (though the governments welfare assessment programme has been doing its best to duplicate this), which means your annual wage drops to £0. I applaud the attempt to raise the minimum wage to what, by 2020, will be a living wage, but I can't see it happening without a rise in unemployment. Meanwhile for those whose income is just above the higher rate minimum wage, it's just hefty cut to tax credits (though these are still over £6k a year to a couple with 2 children).

If you've a food bank or debt advice charity near you, and you have any spare time or compassion, please ring them up and offer your services. They're going to need you.

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