Budget 1999: Winners And Losers - Families gain but not the very poorest

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The Independent Online
THE CHANCELLOR yesterday delivered on the Government's pledge to unveil a redistributive Budget, with low income groups - in particular families with children - set to gain substantially.

Gordon Brown's surprise move to cut the basic rate of tax to 22 pence from April 2000 and introduce of a 10p starting rate in a few weeks benefits all.

Those earning at or around the national average, such as the "recent graduate" in the chart, will see net income - after tax, national insurance, rent and fuel bills - go up from pounds 7,265 in this financial year to pounds 7,440 next year. The cut in the basic rate of income tax from April 2000 will push up net income further in years to come. Revenue-raising moves elsewhere - particularly the increased ceiling on National Insurance contributions - mean that those on lower incomes will benefit most from yesterday's income-tax cuts.

The dual income family, for example, will see net income rise to pounds 25,716 next year from pounds 25,604 in 1999. And although they will benefit from the 22p tax rate in subsequent years, they will also face higher NI contributions.

Also among the major winners are families with children, thanks to increased child benefit and the new children's tax credit.

Gordon Brown told Parliament yesterday that every family with children would get more support under the new system - ranging from pounds 780 per annum to pounds 2,000 per annum.

Martin Barnes of the Child Poverty Action Group said: "The increase in child benefit and the children's tax credit represent an important recognition of the need to support families with children."

Others, however, noted that the Chancellor's moves could be of no help at all to those families who did not work. The Women's Budget Group said: "The Budget speech appeared to say nothing about women with dependent children who are at the lowest incomes. The child benefit increases will be cut from their means-tested benefit receipts. If this is so, then the poorest families of all will not be any better off as a result of the Budget."

Top-rate tax payers will be relieved the Chancellor has backed away from plans to tax child benefit, following wide criticism in political and media circles. However, his decision to taper the new tax credit means that here, too, lower income groups fare better than middle-income earners.

The elderly can also include themselves among the winners. The increases in the winter allowance, the minimum income guarantee and their personal tax allowance all add up to a significant improvement in the finances of many of Britain's pensioners.

Those over 50 and out of work will also find the outlook a little brighter after yesterday's Budget. For those unemployed for six months or more, a new employment credit will guarantee a minimum income of pounds 9,000 for their first year back at work.

Losers include married couples without children who will see their married couple's allowance - currently worth pounds 190 - disappear in April 2000, although pensioners will be excepted. Homeowners have also been hit following the scrapping of mortgage interest relief, which is to go in the financial year after next.

Smokers and drivers are generally the perennial Budget losers, and this year is no exception with both tobacco and petrol duties up again. Drivers of company cars will be particularly hard hit under the proposals outlined by Mr Brown.

Drinkers, however, have managed to get away scot-free. To the surprise of many, the Chancellor has promised that there will be no increase in duty on wine, spirits and beer this side of the millennium.