So we have had some time to digest and consider how the new budget will affect us. I question whether or not the average person knows exactly what the budget is, what it means for them and how it affects their every day life. I also think that the average person should know. So here it is, my review of some of the headlines from the 2014 budget and how they affect you!
So the first question to really answer, is ‘What Is The Budget?’ Do we even know what it really means? The Government’s website describes it as:
“The Budget, or Financial Statement, is a statement made to the House of Commons by the Chancellor of the Exchequer on the nation’s finances and the Government’s proposals for changes to taxation. The Budget also includes forecasts for the economy by the Office for Budget Responsibility (OBR).”
What it really means is that the government we have voted in to lead the country through our democratic process (we all decided that: no escaping, no complaining) get to decide how to spend all of the UK’s money, how they will tax the people and businesses within the UK and how they will be able to make more money. So this is really important, if they get this wrong the county spirals into debt it cannot recover from and we allow our fantastic little country to be fully reliant on a more wealthy area of the world to keep bailing us out.
So it’s probably in agreement across the country that too much debt is bad and that we should fix it. It’s probably fair to assume that the UK’s debts are to blame for our lack of money too, inflation has risen higher than earning for the last few years. So things have become more expensive and we are still getting paid the same. There have been cuts in local governments, in supporting vulnerable people and sweeping changes like the VAT increase that have affected each and every one of us.
How does the 2014 Budget help us then?
The first stat to look at is the UK Borrowing Figures, so this is what the Government think that we will be able to get our borrowing down to over the next 5 years.
2013/2014 – £108bn
2014/2015 – £95bn
2015/2016 – £75bn
2016/2017 – £44bn
2017/2018 – £17bn
2018/2019 – -£5bn
So the current Government believes they are on track for ensuring that the UK borrows no more money from 2018. That’s a mightily impressive start, if you think to your own life and when you are feeling a little worried about money. It’s about the things we’ve purchased without having the money, it’s not the things that we saved hard and paid with upfront that bother us. So if we can get the country from borrowing £108bn to -£5bn in 6 years then we are in a very strong position for starting to pay the £1.3tr that we currently have in debt. So the Government do appear to be wanting to pay back the debt and to get the county’s books balanced.
There is also a focus in this year’s budget about boosting business to help the UK resident as well as the corporation. Each year energy bills get higher and higher and it’s fast becoming a dangerous situation for a lot of UK residents, many wondering how they will simply keep themselves warm next winter. The Government have promised a £7bn package for the energy manufacturers to ensure they can keep energy costs as low as possible. The government have also upped and extended the Annual Investment Allowance to £500,000 until 2015. This means that investors are able to earn that much money without being taxed. The government gets nothing but they do get to boost the economy by investing that money in UK business…you would hope, anyway. We are also focusing on export, where the UK needs to do more business with other countries to help our own economy. Bringing in foreign money is paramount to the UK and the government is working particularly with the financial services sector to try and boost the export opportunity.
Now we get on to the personal stuff. So the Government appear to be trying to do something – they are trying to reduce the amount of money the UK needs to borrow to pay our bills by earning more money. A great way for the government to earn money is to speculate on the of the country, give them some freedom and allow them to spend their hard earned money in their local shops and independent retailers where the UK economy really benefits.
Here are the headlines:
– Personal Tax Allowance up to £10,500 – that means not a penny is taxed on the first £10,500 up from £10k, which is up from just over £6k a few years ago
– 40% Tax Boundary set at £41k – so the higher earners are still getting taxed more, over £41k and the tax DOUBLES (and a bit more)
– Changes in ISA’s – You can now invest up to £15,000 tax free and you can mix cash, stocks and shares – this is up from around £5.5k
All of these should be popular as personal allowance raise is practically a pay rise for us all. The average person cries out for more income equality and while the tax boundaries are barely a step forward it’s a move in the right direction. People having the freedom to create their own wealth is vitally important to the UK economy and with a bit of extra cash being able to be invested in an ISA, and that not being taxed, means opportunity for the UK resident to get some savings and do something with them. Is it perfect? No. Is it enough? No. If the Government just started spewing money at us, inflation would rise beyond sense and like what happened in Germany mid 20th Century: you walk in to a restaurant for a meal, get a price before your starter and by dessert the entire meal cost would have risen due to inflation. Nobody wants that!
Things are not great at the moment, you have to work harder than ever to get no where near what you deserve. It seems all the people with money just get more money, but the only person that can fix that is you. You have to work harder, sleep less, save more, learn new skills and put all of those things together to make something happen for yourself. If you can make something happen then there are ways to make a small amount of money work for you.
We aren’t “all in this together” as David Cameron once said, but those of us that are in this together, we can do something about it. Do you want it enough? Are you willing to put the time and effort in? If the answer is yes then I do believe this budget will help you.