A FEW weeks ago, organisers claim some 250,000 people, led by leading ‘economic thinkers’ as Charlotte Church and Russell Brand, marched ahead of the Summer Budget to protest against austerity.
Let’s have a look at the facts underlying our economy and, more importantly, what it means for businesses like yours.
In 1997, when Gordon Brown took office, the National Debt stood at just £5 billion. Thanks to his spend and borrow policies, the National Debt grew to £300 billion by 2008.
A FEW weeks ago, organisers claim some 250,000 people, led by leading ‘economic thinkers’ as Charlotte Church and Russell Brand, marched ahead of the Summer Budget to protest against austerity.
Let’s have a look at the facts underlying our economy and, more importantly, what it means for businesses like yours.
In 1997, when Gordon Brown took office, the National Debt stood at just £5 billion. Thanks to his spend and borrow policies, the National Debt grew to £300 billion by 2008. When Brown left office in 2010, the National Debt had ballooned to £600 billion and was rising rapidly because of the welfare system. The welfare system now accounts for 34 per cent of all spending, as opposed to just 17 per cent 15 years ago (partly driven by the Tax Credit system).
In 2010, the Coalition Government promised to get the National Debt under control and was met with howls of protest about austerity. The Coalition made so many ‘cuts’ that the Nation Debt rose from the £600 billion that they inherited to £1.3 trillion by the time they left office.
In 2010 the Coalition Government spent £680 billion. In 2015 they spent £720 billion. No matter how hard I try, I can’t make that into a cut!
Ever wondered why the nation’s finances are in such a state? Well new figures from the ONS provide the answer.
Because of Brown’s generous welfare system, over half (51.5 per cent) of British households received more in benefit from the State than they pay in taxes, according to the ONS. That’s not a sustainable picture in the longer term.
In setting the first all-Conservative Budget since Ken Clarke’s in 1997, the Government faces the same problem as the Coalition Government – spending is too high compared to income, and spending has stubbornly refused to come down.
Of course, during the election campaign, the Prime Minister promised not to raise income tax, National Insurance or VAT until 2020. So what was the Chancellor’s strategy?
Well, in an unforeseen move, his reforms of the welfare system involve pushing more of the burden onto businesses through the new living wage and various other measures.
As employers, we have a responsibility to pay our employees when they are sick, pregnant or on holiday. Shortly we will have a responsibility to provide for their retirement through auto-enrolment. Now we will effectively be taking over the burden of the
Tax Credit system from the State with the new living wage. Businesses are going to have to look very carefully at their payroll costs if they are not to see margins eroded.
To discuss any aspect of the recent Budget or any other financial matters contact Harris and Co Chartered Accountants on 01604 660661 or visit the website www.harrisandco.biz
