The Robin Hood budget

Are you a budget winner or loser? That all depends on personal circumstances.

Anyone brought up on a cinematic diet which included Errol Flynn in his many swashbuckling roles will have gasped in recognition as Gordon Brown stood up in the Commons this week. Here was a Chancellor of the Exchequer suddenly metamorphosed into Robin Hood, robbing the rich to help the poor. At least, that was the impression the Chancellor wanted to convey and, surrounded by his Merry Men (or rather, a baying band of Labour MPs) he gave a good approximation of Errol at his best.

How accurate is this picture? Well, it partly depends on where you are in the tax and spend firmament. But it is generally true to say that the biggest gainers out of this Budget will be pensioners, particularly the less well-off, and couples with children.

Although the better-off will not gain so much and, in a few cases, they might even lose out, most of the money will come via tax receipts from falling unemployment and smaller debt interest payments. This means that, while some of Mr Brown's tax measures will impact negatively on the pockets of the middle and upper classes, these will be offset by a combination of tax cuts, including the 10 pence starting rate from 6 April, and the 1p cut in 12 months' time.

But it was the combination both of his delivery and the fact that more vulnerable groups in society were marginally more significant gainers (for a change) that led John Whiting, a tax partner at PricewaterhouseCoopers, the accountancy firm, to say: "He is being quite clever in the way he disposes of his tax resources. They are clearly being concentrated to help lower-paid people, but without hitting higher income-earners too hard. I suppose he is keen to live up to his Robin Hood Chancellor image."

What are the major points of Mr Brown's Budget and how will they affect us? Well, tax and National Insurance are the obvious starting points.

According to calculations by pay and employment benefits firm Arthur Andersen, taking both NI and tax into account, a single person earning pounds 5,000 a year will be pounds 14.29 a month better off from April. The net gain remains at roughly that level until pounds 25,000, rising to pounds 22.83 for salaries of around pounds 35,000 and beyond.

A married person earning pounds 10,000 a year and whose married couple's tax allowance is being abolished, will see a net monthly increase in salary of pounds 7.26, rising to pounds 15.50 on earnings above pounds 35,000.

The problem for anyone trying to calculate whether they are net gainers or losers is that it depends on a multiplicity of factors. Because the Chancellor has decided to alter a wide variety of tax measures, each case must be taken individually, such as whether you drive a company car (ouch), how many children you have and of what age (good news), whether your income is over pounds 38,500 (bad news, you don't get any children's tax credit). Moreover, the new tax credit won't apply until April 2001, while the married couple's allowance is abolished from next year.

Scrapping mortgage interest relief will cost anyone with an interest- only home loan of pounds 30,000 or more pounds 17.47 a month. Mortgage brokers and lenders agree that the result will be to accelerate the current move towards early repayment of home loans.

Roddy Kohn, an independent financial adviser, says: "By removing the last, admittedly small, argument in favour of slower loan repayments, Mr Brown has made it more worthwhile to pay off a mortgage early than ever before."

One move that will prove popular with employees in many firms, though mostly in successful ones, is a proposal by the Chancellor to offer incentives to people who buy shares in their own company. The new scheme will allow staff to buy up to pounds 1,500 of shares from their pre-tax salary. Therefore, a 22 per cent taxpayer will be able to buy pounds 100 worth of shares for pounds 78. In a move that will satisfy higher-rate taxpayers, this privilege is extended to them at the top rate, meaning that the same shares will only cost them pounds 60. The companies will be allowed to give free shares up to twice the amount of those bought.

When they are cashed in, gains on the shares will be tax-free, if they are kept for 10 years. They will be subject to tax on the salary used to buy them, but this tapers off the longer a share is held, falling to zero after 10 years.

Two other measures may have an even greater financial impact on the lives of millions of savers and borrowers. The first was the announcement by the Chancellor this week that mortgage lenders will face far tougher rules on the way they set out the true cost of their loans. In recent years, lending rates have become all but impossible to understand.

APR, as a mechanism for standardising headline mortgage costs, became virtually useless. From now, lenders will be required to show the APR as a reflection of the true cost of a loan, including initial charges and any other application fees over the full period of the loan. That means any discount or fixed period is seen in the context of the variable rate for the remaining period. Where a variable rate is cited, it will be possible to tell the true difference between annual and daily interest calculations.

Just as important is the fact that the Financial Services Authority, the City watchdog, will now be publishing "best-buy" league tables for pension funds, mortgages and other investments. This will increase the pressure on companies to cut the charges they levy on their products, forcing them to deliver decent value to their clients - in many cases for the first time ever.

Who knows, one day Robin "Gordon" Hood's legacy may be to have delivered something that appeared to cost nothing - while benefiting millions of us at the same time.

Nic Cicutti Comment, page 2

Internet Investor, page 3

Brian Tora, page 4

The Budget in Your Pocket,

pages 6 & 7

Have you tried new the Independent Digital Edition apps?
Life and Style
ebookNow available in paperback
ebooks
ebookPart of The Independent’s new eBook series The Great Composers
Arts and Entertainment
Buttoned up: Ryan Reynolds with Helen Mirren in ‘Woman in Gold’
filmFor every box-office smash in his Hollywood career, there's always been a misconceived let-down. Now he says it's time for a reboot
News
people
News
Actress Julianne Moore wins the Best Actress in a Leading Role Award for 'Still Alice' during the 87th Annual Academy Awards in Hollywood, California
people
Sport
Ross Barkley
footballPaul Scholes says it's time for the Everton playmaker to step up and seize the England No 10 shirt
News
'We will fix it': mice in the 1970s children’s programme Bagpuss
science
Life and Style
2 Karl Lagerfeld and Choupette
fashion
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs General

    Recruitment Genius: Customer Service Executive

    £18000 - £22000 per annum: Recruitment Genius: This is an exciting opportunity...

    Recruitment Genius: Retail Buyer / Ecommerce Buyer

    £30000 - £35000 per annum: Recruitment Genius: Working closely with the market...

    Recruitment Genius: Sales Executive - CAD Software Solutions Sales

    £20000 - £50000 per annum: Recruitment Genius: A reputable company, famed for ...

    Ashdown Group: Client Accountant Team Manager - Reading

    Negotiable: Ashdown Group: The Ashdown Group has been engaged by a highly resp...

    Day In a Page

    War with Isis: Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria's capital

    War with Isis

    Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria
    Scientists develop mechanical spring-loaded leg brace to improve walking

    A spring in your step?

    Scientists develop mechanical leg brace to help take a load off
    Peter Ackroyd on Alfred Hitchcock: How London shaped the director's art and obsessions

    Peter Ackroyd on Alfred Hitchcock

    Ackroyd has devoted his literary career to chronicling the capital and its characters. He tells John Walsh why he chose the master of suspense as his latest subject
    Ryan Reynolds interview: The actor is branching out with Nazi art-theft drama Woman in Gold

    Ryan Reynolds branches out in Woman in Gold

    For every box-office smash in Ryan Reynolds' Hollywood career, there's always been a misconceived let-down. It's time for a rethink and a reboot, the actor tells James Mottram
    Why Robin Williams safeguarded himself against a morbid trend in advertising

    Stars safeguard against morbid advertising

    As film-makers and advertisers make increasing posthumous use of celebrities' images, some stars are finding new ways of ensuring that they rest in peace
    The UK horticulture industry is facing a skills crisis - but Great Dixter aims to change all that

    UK horticulture industry facing skills crisis

    Great Dixter manor house in East Sussex is encouraging people to work in the industry by offering three scholarships a year to students, as well as generous placements
    Hack Circus aims to turn the rule-abiding approach of TED talks on its head

    Hack Circus: Technology, art and learning

    Hack Circus aims to turn the rule-abiding approach of TED talks on its head. Rhodri Marsden meets mistress of ceremonies Leila Johnston
    Sevenoaks is split over much-delayed decision on controversial grammar school annexe

    Sevenoaks split over grammar school annexe

    If Weald of Kent Grammar School is given the go-ahead for an annexe in leafy Sevenoaks, it will be the first selective state school to open in 50 years
    10 best compact cameras

    A look through the lens: 10 best compact cameras

    If your smartphone won’t quite cut it, it’s time to invest in a new portable gadget
    Paul Scholes column: Ross Barkley played well against Italy but he must build on that. His time to step up and seize that England No 10 shirt is now

    Paul Scholes column

    Ross Barkley played well against Italy but he must build on that. His time to step up and seize that England No 10 shirt is now
    Why Michael Carrick is still proving an enigma for England

    Why Carrick is still proving an enigma for England

    Manchester United's talented midfielder has played international football for almost 14 years yet, frustratingly, has won only 32 caps, says Sam Wallace
    Tracey Neville: The netball coach who is just as busy as her brothers, Gary and Phil

    Tracey Neville is just as busy as her brothers, Gary and Phil

    The former player on how she is finding time to coach both Manchester Thunder in the Superleague and England in this year's World Cup
    General Election 2015: The masterminds behind the scenes

    The masterminds behind the election

    How do you get your party leader to embrace a message and then stick to it? By employing these people
    Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

    Machine Gun America

    The amusement park where teenagers go to shoot a huge range of automatic weapons
    The ethics of pet food: Why are we are so selective in how we show animals our love?

    The ethics of pet food

    Why are we are so selective in how we show animals our love?